Investment Thread

[fuse]

Yep, it's a dialogue some employers do not want to have. Some disclosures commingle it with other fees making it hard to determine. Legally, it must be disclosed.

Today I learned my fee is $45/year and had been free until last fiscal year.

[Jeffrey]

Today I learned my fee is $45/year and had been free until last fiscal year.

Highly reasonable fee!

Many people work for small employers (100 or less employees) and pay fees of 0.5 - 1.0% of assets. Those are deadly and I would have had a proposed solution, if anybody had stated high fees.

[Jeffrey]

IMO, the small employer 401k concern should be administrative fees. For those of you who work for large employers, the concern should be investment fees. For example...

https://www.bna.com/ge-hit-lawsuit-n73014470168/

[budwom]

IMO, the small employer 401k concern should be administrative fees. For those of you who work for large employers, the concern should be investment fees. For example...

https://www.bna.com/ge-hit-lawsuit-n73014470168/

my mainstay index fund from IBM via Fidelity charges .03%, which is lovely.

[Jeffrey]

my mainstay index fund from IBM via Fidelity charges .03%, which is lovely.

Yes, it is! Probably an institutional index fund.

IMO, Big Blue always had one of the best benefit packages. The rub was how many of their employees kept a very large concentration of their personal net worth in IBM stock.

[budwom]

Yes, it is! Probably an institutional index fund.

IMO, Big Blue always had one of the best benefit packages. The rub was how many of their employees kept a very large concentration of their personal net worth in IBM stock.

Big problem for a lot of 401k plans, that (too much company stock)...I can say though that IBM never pushed the notion.
I do know one guy who bet the ranch on IBM stock when the company almost went under a couple decades ago...stock sank to $40 or so, about the value of all the pencils and staplers
IBM had...this guy and his wife put their entire 401k pot into IBM stock and made out marvelously well, but it was pretty risky to be sure.

[Jeffrey]

Big problem for a lot of 401k plans, that (too much company stock)...I can say though that IBM never pushed the notion.
I do know one guy who bet the ranch on IBM stock when the company almost went under a couple decades ago...stock sank to $40 or so, about the value of all the pencils and staplers
IBM had...this guy and his wife put their entire 401k pot into IBM stock and made out marvelously well, but it was pretty risky to be sure.

I'm thinking back to the IBM pension plan (defined benefit) days. Back then, many IBMers had most of their net worth (excluding the pension plan) in IBM stock. LICU lent a lot of money against the stock while converting it from paper to DTC.

[YmoBeThere]

my mainstay index fund from IBM via Fidelity charges .03%, which is lovely.

This is where life is a matter of perspective. One(i.e me) could contend you are paying 50% higher in asset fees on that fund than you could be.

[fidel]

This is where life is a matter of perspective. One(i.e me) could contend you are paying 50% higher in asset fees on that fund than you could be.

Not sure what you are saying. This is one where '50% higher' sounds big, but in reality is more like a hundred bucks on a million under management. Management fees will certainly be non-zero.

99.999% of fees are higher I would guess. And most not even close to this, presumably even in the choices IBM provides. Certainly not near the 0.0015% target you state. I don't think the objective is a perfect solution, but the best one you can attain given your available options. I'd say Budwom has done well.

[YmoBeThere]

Not sure what you are saying. This is one where '50% higher' sounds big, but in reality is more like a hundred bucks on a million under management. Management fees will certainly be non-zero.

99.999% of fees are higher I would guess. And most not even close to this, presumably even in the choices IBM provides. Certainly not near the 0.0015% target you state. I don't think the objective is a perfect solution, but the best one you can attain given your available options. I'd say Budwom has done well.

.03%/.02% = 1.5 or 50% higher. His fund fees are very, very good. There are better available. Your 50% of his current fee would imply he is paying double what he should. That $100 could turn into anywhere $1800 to $6,000 over a 43 year employment career. All these things are simple math based on simple assumptions. Sometimes paying 1% for a management fee would be reasonable depending upon the situation.

[budwom]

I'm thinking back to the IBM pension plan (defined benefit) days. Back then, many IBMers had most of their net worth (excluding the pension plan) in IBM stock. LICU lent a lot of money against the stock while converting it from paper to DTC.

I worked for IBM back in those days and know very few people who did that (and I worked with 8500 people), though of course that's just anecdotal. Some people DID accumulate a lot of stock (and rarely sold it) thru the stock purchase plan, but that was different from the 401 (k) plan of course..

[Neals384]

Regarding investment advisors, I have had less than stellar results. I manage my own, but a number of years ago we took on responsibility for two elderly relatives, D and G. We handled living arrangements, bills, medical issues, and so, but I didn't want rsponsibility for their money. They each engaged the services of a highly recommended advisor with a well-known national firm.

G had a sizable portfolio and minimal expenses, so the advisor placed her $ in the firm's conservative income portfolio. D, however, had higher expenses and a smaller portfolio, so the conservative income portfolio would not have generated sufficient income. So the advisor placed her $ into a high income portfolio. That portfolio included a money market alternative that went south in 2008, leaving D with substantial losses. Wouldn't it have been better to use the conservative portfolio and withdraw principle t make up the difference? At 90 years old, she was not going to spend it all.

so now you're thinking 1 out of 2 ain't bad. Well, one day G received a letter explaining that the firm was changing the equity allocation of her conservative income portfolio from 20% to 30%. What? Since when does changing one's asset allocation overnight constitute competent financial management. Please note, this came from headquarters, not the local advisor! Anyone care to guess when that letter was sent?

I will ill say that the advisor was excellent in working wth our two seniors and helping them understand what was going on. That was probably worth the fee.

not saying I haven't made substantial mistakes on my own, but at least it's not costing me a fee to get goofs I can do for free.

[Jeffrey]

I worked for IBM back in those days and know very few people who did that (and I worked with 8500 people), though of course that's just anecdotal. Some people DID accumulate a lot of stock (and rarely sold it) thru the stock purchase plan, but that was different from the 401 (k) plan of course..

Thanks, now, I see the communication breakdown. I wrote...

IMO, Big Blue always had one of the best benefit packages. The rub was how many of their employees kept a very large concentration of their personal net worth in IBM stock.

IMO, personal net worth is an aggregate. Your money is your money, regardless of which investment vehicle, account, etc. you are utilizing.

IMO, myopic thinking is harmful. I believe a prudent investor should make all investment decisions based upon their aggregate financial situation. A prudent investor should always know what percentage of their aggregate personal net worth is invested in a particular stock, mutual fund, investment account, etc. Just because you do not have any IBM stock in your 401k plan does not mean you do not have a very large concentration of your personal net worth in IBM stock.

[budwom]

Thanks, now, I see the communication breakdown. I wrote...



IMO, personal net worth is an aggregate. Your money is your money, regardless of which investment vehicle, account, etc. you are utilizing.

IMO, myopic thinking is harmful. I believe a prudent investor should make all investment decisions based upon their aggregate financial situation. A prudent investor should always know what percentage of their aggregate personal net worth is invested in a particular stock, mutual fund, investment account, etc. Just because you do not have any IBM stock in your 401k plan does not mean you do not have a very large concentration of your personal net worth in IBM stock.

The vast majority of the professional folks I knew at IBM did not accumulate a lot of IBM stock...they bought it on a regular basis because they got it at a 15% discount (I believe) but tended to sell it quickly...there was even a business set up near our facility to buy IBM stock from employees...In the 1960s and 1970s I am told employees did great by accumulating IBM stock, but by the time I joined the company in 1982, competitive pressures were everywhere and most seemed to see the wisdom in diversifying risk, i.e. having both your job AND your investment in IBM was not especially prudent.

[Jeffrey]

... having both your job AND your investment in IBM was not especially prudent.

Strongly agree!

[Jeffrey]

For those who buy individual securities, what stock do you favor at today's price?

[YmoBeThere]

For those who buy individual securities, what stock do you favor at today's price?

I bought some GM yesterday and found JNJ interesting today...

[fuse]

I bought some GM yesterday and found JNJ interesting today...

As a long time JNJ holder, I hope it continues to be positively interesting in the future :-)

[Jeffrey]

Another opinion on our most recent posts. IMO, watching this one minute video is time well spent.

https://www.cnbc.com/2017/05/22/tony...r&par=sharebar

"Cutting fees by just 1 percent, he explained, can make your money last 10 additional years in retirement.

According to Robbins, hidden fees and various backdoor payments are costing Americans billions of dollars a year and can reduce an investor's overall retirement savings by as much as 40 percent to 60 percent."

[fuse]

Had to dig to bring this back to the top.

Fidelity announces 2 zero fee mutual funds, available starting today.

One total market, one international fund.

Clearly there is no history on which to draw relative to performance.

Curious if the wiser financial minds on DBR have a take- hot or otherwise.