401K investment advice

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Quercus bicolor's picture
Quercus bicolor
Status: Gold Member (Offline)
Joined: Mar 19 2008
Posts: 470
401K investment advice

Of all times, my employer is starting a new 401k plan now.  I'd love some advice on what to invest their contribution in (no contribution from me right now!).

Here are some options in among the usual mutual fund culprits that may have some redeeming value:

  1. A money market fund (it's dollar denominated).
  2. Treasury money market fund (not too good if the dollar crashes).
  3. global large cap stock fund (includes the U.S. - 2% redemption fee if withdrawn within 90 days).
  4. international growth and income (non U.S. stocks) - same redemption fee.
  5. A global commodities stock fund (all commodities) - holdings are 67% energy related - coal, oil and gas , etc.), 22% "industrial materials" - various things that are mined or cut (wood), from what I can tell, about 5% in precious metals. 
  6. An international bond fund - nondollar-denominated government and corporate bonds outside the U.S.

The rest is mostly U.S. stocks and bonds.  I'd love to hear peoples thoughts.

 

JeffCFP's picture
JeffCFP
Status: Member (Offline)
Joined: Nov 22 2008
Posts: 3
Re: 401K investment advice

I answer questions like yours for a living.  As you might expect, the answer you are looking for is highly dependent on your personal financial situation and your objectives.  However, given your options above, you probably do not want to overweight your self in US equities.  Does your new plan offer a precious metals fund?  If not, you can ask your employer to put it in the plan.  If enough employees make noise (you know, the old squeaky wheel analogy) you can get some decent funds added to most 401(k)'s.

Also, if you are deciding not to contribute, don't forget the benefits of getting a current tax dedection on all the money you put in.

JeffCFP

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: 401K investment advice

Are you getting a company match on contributions or is your company sharing profits into your plan?  You may want to contribute only to the extent you get a match, and put the rest of what you want to save in a personal IRA or Roth IRA, where there would be more flexibility.  Personally I feel now broad stock funds "diversified" across the market and "buy and hold" are no longer safe strategies.  There are likely opportunities in certain sector like energy or precious metals but you have to know enough to pick the right ones at the right time. Some have the thesis foreign stocks will harbor a protection from a falling dollar; I'm not sure yet.  I'm not a financial expert so do your own diligence.

The whole idea that we have to put our money at risk just to preserve its value from inflation shows the problem with our system.

jsr's picture
jsr
Status: Member (Offline)
Joined: Oct 30 2008
Posts: 2
Re: 401K investment advice
woodman wrote:

The whole idea that we have to put our money at risk just to preserve its value from inflation shows the problem with our system.

 

That says a lot. 

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