Your Ad Here

Tuesday, June 30, 2009

Outrageous 401k Fees load Fees Rebalance Fees Seems all I hear is FEES

Everyday in my day to day life I talk markets to anyone and everyone who will listen. Heck I even talk to the toilet, though I don't hear anything except flush the toilet bozo. But the point I am getting at, 401k fees glancing in my 401k company sponsored program through my employer. I was surprised to see I have some pretty decent rates, compared to most.

My work using Principal Financial Group, most of the funds they have for us charge around 1% with a T. Rowe Price Growth stock r fund charging charging 1.69% and a goldman sachs growth fund charging 1.72%. I just about blew a gasket when I checked into this. Sure they are managed funds and deserve to be paid to manage the money. This is blown out the water though.

Then we have transfer restictions when and how often you can move money around. Not to mention the fees for doing a rebalance. I was a novice on my first rebalance and lost almost $500.00 so quess what I will not be rebalance the 401k for quite some time now. I hear people talk about invest 10,000 with this mutal fund and only had to pay a 5% load. They talk like its the normal thing to do. Its like going to walmart seeing a tv you like and want to buy right now, so you pay walmart a $300 fee for having the tv and letting you buy it, plus the cost of the tv too. Wow bless their heart.

If my company wasnt matching my contributions to my 401k I would simply not put anything in such a waste in my eyes. So the questions becomes, Does it seem that your already Shruken 401k retirement account keeps getting eating up by these hidden fees?
Maybe the time is here to switch to an exchange traded fund (ETF) portfolio?

For instance you can purchase the S&P 500 in one etf called SPY which holds all 500 stocks of the S&P500 in one fund. This fund charges are you ready, check this our .10 percent. Yes thats right 1/10th of a percent. Imagaine the differnce in 30 years, that can have on your retirement. Plue etfs can be traded at any time the market is open, can be traded in and out of many times in the same day if ya like. They have a NAV net asset value just like mutual funds. My favorite etf research center is ETF connect.

Dividends are a major part of your retirement portfolio as well. Etfs well a great deal many of them pay quarterly dividends. Some fixed income etfs pay dividends each month, Like LQD 6%, HYG 10.8%, TIPS 4.41%.

Matthew Hougan for Index Universe offers his take on what are truly the best things about investing in ETFs. By process of elimination, he comes to his conclusion that there are two things above all others that ETFs have to offer.

Many claim it is the low fees that attract investors, however, different share classes at Vanguard make Hougan question this. Transparency is also touted, but many funds stick to their indexes with no problems. Excitement could be another reason, but there can not be any excitement without real substance.

The best characteristic an ETF can offer, in Hougan’s opinion, is tax efficiency. As far as straight equities are concerned, ETFs are the best idea for getting maximized tax benefits.

The other amazing thing ETFs provide are easy access to institutional-grade newer asset classes. ETFs are taking on a new investment life, transforming advisors from stock pickers to asset allocation strategists. Between commodities, real estate, currencies and even timber, the investment horizon has just widened. You can buy the entire market for just 0.7%, if you were so inclined.

I agree – ETFs have made it simple for even the Do it yourself investors(like me, you and most reading this ) to play along, not just because of their tax benefits and easy access, but because of their low expenses, transparency and simple, all-day trading. After so many were let down by their mutual funds in the early 2000s, ETFs have made it easy for self-directed investors to have more control.

The moral of this story, you will be better off in the long run if you can keep more of your hard earned money for yourself. The ETF investing train is here and people are getting on right and left are you going to get on and save some off your money or keep tossing it away at those idiotic load fees , undisclosed fees, can we stick ya with this fee, and whatever else fees they can stick you with?

Disclosure I am long SPY,LQD,HYG, and TIPS in my etf folio's.

Tea Forte Cocktail Infusions

1 comment: