I don’t claim to be an expert, but am looking for opinions

[nostradamus]

You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit. BTW the realization that 401k’s are not my friend partly contributed to my decision to become a self-employed consultant. I do the same work but pay less taxes and make more money even paying for my own retirement and medical benefits. Self-employed I qualify for SEP-IRA meaning I can contribute the lesser of 25% of my income or $46k. In many cases this is much more than you can contribute to a 401k.

A 401k does not mean you are restricted to certain funds. You can still have a 401k and invest it in cd’s I think.

[HLS]

Z, I state them precisely BECAUSE they are facts.
I deal with people on a daily basis who don’t realize the difference between these facts and opinions.

What might be “obvious” to you, isn’t obvious to everyone.

I agree with all that it is possible to make money in the market.

The fact remains that nobody knows what they will have in their 401K account 5, 10 or 20 years from now, regardless of any past returns.

My point is that just because there have been ups and downs in the past, and they PROBABLY will repeat, it isn’t guaranteed.

Even a time horizon of >10 yrs doesn’t g’tee the return.

Lots of people have no buisness being invested in the stock market.
Fortunes are made and lost by uninformed people.

[HLS]

Z, I state them precisely BECAUSE they are facts.
I deal with people on a daily basis who don’t realize the difference between these facts and opinions.

What might be “obvious” to you, isn’t obvious to everyone.

I agree with all that it is possible to make money in the market.

The fact remains that nobody knows what they will have in their 401K account 5, 10 or 20 years from now, regardless of any past returns.

My point is that just because there have been ups and downs in the past, and they PROBABLY will repeat, it isn’t guaranteed.

Even a time horizon of >10 yrs doesn’t g’tee the return.

Lots of people have no buisness being invested in the stock market.
Fortunes are made and lost by uninformed people.

[HLS]

Z, I state them precisely BECAUSE they are facts.
I deal with people on a daily basis who don’t realize the difference between these facts and opinions.

What might be “obvious” to you, isn’t obvious to everyone.

I agree with all that it is possible to make money in the market.

The fact remains that nobody knows what they will have in their 401K account 5, 10 or 20 years from now, regardless of any past returns.

My point is that just because there have been ups and downs in the past, and they PROBABLY will repeat, it isn’t guaranteed.

Even a time horizon of >10 yrs doesn’t g’tee the return.

Lots of people have no buisness being invested in the stock market.
Fortunes are made and lost by uninformed people.

[HLS]

Z, I state them precisely BECAUSE they are facts.
I deal with people on a daily basis who don’t realize the difference between these facts and opinions.

What might be “obvious” to you, isn’t obvious to everyone.

I agree with all that it is possible to make money in the market.

The fact remains that nobody knows what they will have in their 401K account 5, 10 or 20 years from now, regardless of any past returns.

My point is that just because there have been ups and downs in the past, and they PROBABLY will repeat, it isn’t guaranteed.

Even a time horizon of >10 yrs doesn’t g’tee the return.

Lots of people have no buisness being invested in the stock market.
Fortunes are made and lost by uninformed people.

[HLS]

Z, I state them precisely BECAUSE they are facts.
I deal with people on a daily basis who don’t realize the difference between these facts and opinions.

What might be “obvious” to you, isn’t obvious to everyone.

I agree with all that it is possible to make money in the market.

The fact remains that nobody knows what they will have in their 401K account 5, 10 or 20 years from now, regardless of any past returns.

My point is that just because there have been ups and downs in the past, and they PROBABLY will repeat, it isn’t guaranteed.

Even a time horizon of >10 yrs doesn’t g’tee the return.

Lots of people have no buisness being invested in the stock market.
Fortunes are made and lost by uninformed people.

[DaCounselor]

“You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit.”
______________________________

There certainly are a number of variables but very generally speaking in the world of 401K’s the management fee premium you may pay will be easily trumped by the tax savings. For instance and using my earlier hypothetical, if you are deferring taxes on $10.5K/year (= $3K/year) and your management premium is 1% over an IRA, it would take about 30 years for your management premium to equal the initial tax savings, and that is assuming a 0% return on your investment, which is highly unlikely – you’re going to make more over the long haul – probably considerably more than 0%. Hard to see how a management fee premium is going to outweigh positive tax implications. As for the effect of market fluctuations – who knows what they will be – how can you figure that out?

Bottom line is there are more uncertainties than certainties and you can debate the uncertainties til the cows come home and never get anywhere. As for the certainties, again using my example above it is an absolute certainty that an extra $3K is going to get invested instead of going to Uncle Sam if you go with the 401K. I look at that as an instantaneous 50% return (instead of getting around $7K after taxes, I get $10.5K to invest). As Emeril says – BAM! – 50%. It’s also an absolute certainty that you will have an opportunity to have that extra money work for you in the market.

I absolutely respect everyone’s own choice to do what they will with their money but to me maxing out a 401K is a no-brainer.

[DaCounselor]

“You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit.”
______________________________

There certainly are a number of variables but very generally speaking in the world of 401K’s the management fee premium you may pay will be easily trumped by the tax savings. For instance and using my earlier hypothetical, if you are deferring taxes on $10.5K/year (= $3K/year) and your management premium is 1% over an IRA, it would take about 30 years for your management premium to equal the initial tax savings, and that is assuming a 0% return on your investment, which is highly unlikely – you’re going to make more over the long haul – probably considerably more than 0%. Hard to see how a management fee premium is going to outweigh positive tax implications. As for the effect of market fluctuations – who knows what they will be – how can you figure that out?

Bottom line is there are more uncertainties than certainties and you can debate the uncertainties til the cows come home and never get anywhere. As for the certainties, again using my example above it is an absolute certainty that an extra $3K is going to get invested instead of going to Uncle Sam if you go with the 401K. I look at that as an instantaneous 50% return (instead of getting around $7K after taxes, I get $10.5K to invest). As Emeril says – BAM! – 50%. It’s also an absolute certainty that you will have an opportunity to have that extra money work for you in the market.

I absolutely respect everyone’s own choice to do what they will with their money but to me maxing out a 401K is a no-brainer.

[DaCounselor]

“You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit.”
______________________________

There certainly are a number of variables but very generally speaking in the world of 401K’s the management fee premium you may pay will be easily trumped by the tax savings. For instance and using my earlier hypothetical, if you are deferring taxes on $10.5K/year (= $3K/year) and your management premium is 1% over an IRA, it would take about 30 years for your management premium to equal the initial tax savings, and that is assuming a 0% return on your investment, which is highly unlikely – you’re going to make more over the long haul – probably considerably more than 0%. Hard to see how a management fee premium is going to outweigh positive tax implications. As for the effect of market fluctuations – who knows what they will be – how can you figure that out?

Bottom line is there are more uncertainties than certainties and you can debate the uncertainties til the cows come home and never get anywhere. As for the certainties, again using my example above it is an absolute certainty that an extra $3K is going to get invested instead of going to Uncle Sam if you go with the 401K. I look at that as an instantaneous 50% return (instead of getting around $7K after taxes, I get $10.5K to invest). As Emeril says – BAM! – 50%. It’s also an absolute certainty that you will have an opportunity to have that extra money work for you in the market.

I absolutely respect everyone’s own choice to do what they will with their money but to me maxing out a 401K is a no-brainer.

[DaCounselor]

“You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit.”
______________________________

There certainly are a number of variables but very generally speaking in the world of 401K’s the management fee premium you may pay will be easily trumped by the tax savings. For instance and using my earlier hypothetical, if you are deferring taxes on $10.5K/year (= $3K/year) and your management premium is 1% over an IRA, it would take about 30 years for your management premium to equal the initial tax savings, and that is assuming a 0% return on your investment, which is highly unlikely – you’re going to make more over the long haul – probably considerably more than 0%. Hard to see how a management fee premium is going to outweigh positive tax implications. As for the effect of market fluctuations – who knows what they will be – how can you figure that out?

Bottom line is there are more uncertainties than certainties and you can debate the uncertainties til the cows come home and never get anywhere. As for the certainties, again using my example above it is an absolute certainty that an extra $3K is going to get invested instead of going to Uncle Sam if you go with the 401K. I look at that as an instantaneous 50% return (instead of getting around $7K after taxes, I get $10.5K to invest). As Emeril says – BAM! – 50%. It’s also an absolute certainty that you will have an opportunity to have that extra money work for you in the market.

I absolutely respect everyone’s own choice to do what they will with their money but to me maxing out a 401K is a no-brainer.

[DaCounselor]

“You’re right DaCounselor and tax implications are worth considering; however, when you start having enough of a nest egg management fees and market fluctuations can wipe out any tax benefit.”
______________________________

There certainly are a number of variables but very generally speaking in the world of 401K’s the management fee premium you may pay will be easily trumped by the tax savings. For instance and using my earlier hypothetical, if you are deferring taxes on $10.5K/year (= $3K/year) and your management premium is 1% over an IRA, it would take about 30 years for your management premium to equal the initial tax savings, and that is assuming a 0% return on your investment, which is highly unlikely – you’re going to make more over the long haul – probably considerably more than 0%. Hard to see how a management fee premium is going to outweigh positive tax implications. As for the effect of market fluctuations – who knows what they will be – how can you figure that out?

Bottom line is there are more uncertainties than certainties and you can debate the uncertainties til the cows come home and never get anywhere. As for the certainties, again using my example above it is an absolute certainty that an extra $3K is going to get invested instead of going to Uncle Sam if you go with the 401K. I look at that as an instantaneous 50% return (instead of getting around $7K after taxes, I get $10.5K to invest). As Emeril says – BAM! – 50%. It’s also an absolute certainty that you will have an opportunity to have that extra money work for you in the market.

I absolutely respect everyone’s own choice to do what they will with their money but to me maxing out a 401K is a no-brainer.

[poorgradstudent]

Chasing past performance is a logical fallacy and can lead to trouble.

For a mutual fund, it’s far better to compare its performance to the market as a whole. While “only” losing 8% when the market is down 10% isn’t exactly exciting, consistently outperforming the market (and not just over say, 6 months) is a good indicator that smart people are managing the fund. Funds with rookie managers and not much history are risky.

If your portfolio is diverse already with a mix of stocks and bonds you shouldn’t have to shift as the wind blows. If you’re making deposits monthly, in a down market you should be buying relatively cheap.

There’s nothing wrong with shifting out of an underperforming fund. And there is a time and place for rebalancing a portfolio. If you were 100% stocks before, now is a great time to fix the fact you were out of balance.

It depends a lot on how much time you want to spend managing your money. For the average person, buying and holding a good fund is the way to go. There are ways to do better, but for most, the time and effort aren’t worth the yields.

[poorgradstudent]

Chasing past performance is a logical fallacy and can lead to trouble.

For a mutual fund, it’s far better to compare its performance to the market as a whole. While “only” losing 8% when the market is down 10% isn’t exactly exciting, consistently outperforming the market (and not just over say, 6 months) is a good indicator that smart people are managing the fund. Funds with rookie managers and not much history are risky.

If your portfolio is diverse already with a mix of stocks and bonds you shouldn’t have to shift as the wind blows. If you’re making deposits monthly, in a down market you should be buying relatively cheap.

There’s nothing wrong with shifting out of an underperforming fund. And there is a time and place for rebalancing a portfolio. If you were 100% stocks before, now is a great time to fix the fact you were out of balance.

It depends a lot on how much time you want to spend managing your money. For the average person, buying and holding a good fund is the way to go. There are ways to do better, but for most, the time and effort aren’t worth the yields.

[poorgradstudent]

Chasing past performance is a logical fallacy and can lead to trouble.

For a mutual fund, it’s far better to compare its performance to the market as a whole. While “only” losing 8% when the market is down 10% isn’t exactly exciting, consistently outperforming the market (and not just over say, 6 months) is a good indicator that smart people are managing the fund. Funds with rookie managers and not much history are risky.

If your portfolio is diverse already with a mix of stocks and bonds you shouldn’t have to shift as the wind blows. If you’re making deposits monthly, in a down market you should be buying relatively cheap.

There’s nothing wrong with shifting out of an underperforming fund. And there is a time and place for rebalancing a portfolio. If you were 100% stocks before, now is a great time to fix the fact you were out of balance.

It depends a lot on how much time you want to spend managing your money. For the average person, buying and holding a good fund is the way to go. There are ways to do better, but for most, the time and effort aren’t worth the yields.

[poorgradstudent]

Chasing past performance is a logical fallacy and can lead to trouble.

For a mutual fund, it’s far better to compare its performance to the market as a whole. While “only” losing 8% when the market is down 10% isn’t exactly exciting, consistently outperforming the market (and not just over say, 6 months) is a good indicator that smart people are managing the fund. Funds with rookie managers and not much history are risky.

If your portfolio is diverse already with a mix of stocks and bonds you shouldn’t have to shift as the wind blows. If you’re making deposits monthly, in a down market you should be buying relatively cheap.

There’s nothing wrong with shifting out of an underperforming fund. And there is a time and place for rebalancing a portfolio. If you were 100% stocks before, now is a great time to fix the fact you were out of balance.

It depends a lot on how much time you want to spend managing your money. For the average person, buying and holding a good fund is the way to go. There are ways to do better, but for most, the time and effort aren’t worth the yields.

[Author]

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