Sunday, November 26, 2006

Retriement Portfolio: 401 (k) Asset Re-allocation...

In a post long ago, I mentioned that I intended on creating a less expensive, and better performing 401 (k) portfolio. Well, I finally got off my butt and did it. Unfortunately my options were limited to Prudential Financial's 9 mutual funds, one fixed income fund, and my companies stock. Those mutual funds had an average expense ratio of 0.92% and a front load of 4.61%, not that bad I suppose, I've heard of worse options.

I wound up dropping CABDX, SPVAX, and MIGFX. My portfolio in particular averaged an expense ratio of 1.07% and front load of 5.30%. I kept AEPGX, LAVX and obtained an index fund, PDSIX. No load at all, and it has an expense ratio of 0.30%. Nowa days my portfolio is averaging an expense ratio of 0.73% and front load of 3.83%. The funds I now have, average a five year performance of a little under 11%, and ten year of a little over 12%.

I'll try my best to re-balance every quarter, and at the least every two quarters depending on how each sector of the economy, and the funds perform. Next I'll have to research my wife's 401 (k) portfolio, to find the best value for our money. That should be fun playing with 17 different funds ranging from Vanguard's 500 index fund to Dodge & Cox's Stock fund!

5 comments:

G. said...

Nice work, I'm looking into lowering my expenses on some of the mutual funds that I invest in with my 401k from Fidelity. Unfortunately the better preforming funds are more expensive and there are a limited number of choices

sun said...

John: With the front load, do you have to pay fees every time you make a purchase? I know for taxable account, that's the case but not sure about 401(k) account. If that's true, then it's too expensive for a retirement account. Hope that 11-12% return already considered all the fees and expenses. Do you coworkers have the same complain about the expenses? If they, then probably you can talk with your employer and try to ask them to get some low-fee alternatives.

John said...

Hi Sun:
I believe so, but I never really noticed since I didn't pay attention to those things. Yes, those percentage returns are load adjusted. My co-workers don't seem to be investment savvy when it comes to those things. I've already briefly spoken to our benefits dept. about it, no luck. I'll have to make the best of what I have....

Anonymous said...

Something is drastically wrong with the retirement program set up by your employer. LOaded funds of any type are a rip off. Brokers will disagree because this is how they make their commissions. In sum, avoid them at all costs. You should buy the no-load index fund in this program and balance it out with good funds in your wife's. Dodge & Cox is a great low cost fund. Look for a little international exposure as well.

John said...

Those are good points. But since I've already purchased the funds, and they are front loaded, I believe I've already been charged. All I have to worry about now are the expense ratios....