I have provided investment advice to individual Minnesota company 401(k) retirement plan participant for over 15 years. I find room for all three types of company 401(k) retirement plan fund options.
First, I use index mutual funds. These mutual funds replicate the price movement of the most popular U.S. stock market averages. Every company retirement plan menu that I review has at least one stock market index mutual fund option.
Index mutual funds are the lowest cost mutual funds. The annual expenses of index mutual funds are under .25 percent per year. Index mutual funds offer a low cost way for individual company 401(k) retirement plan participants to own the most popular pieces of U.S. stock markets.
Second, I use actively managed mutual funds. These are the kinds of mutual funds that most individual investors know something about.
A skilled mutual fund manager can provide better annual investment returns during some stock market environments. But not all mutual fund managers beat the stock market averages over the long term.
The trick is to find the mutual funds on your company 401(k) retirement plan menu that are worth the extra annual costs. This analysis takes time and experience. Your current investment advisor may be able to help you find those mutual funds on your company 401(k) retirement plan menu.
Third, I use low cost exchange traded funds. These funds are most commonly referred to as ETF’s.
More and more Minnesota company 401(k) retirement plans are offering a self-directed brokerage account (SDBA) option. The SDBA account is a brokerage account within a company 401(k) retirement plan account.
In a SDBA account, individual company 401(k) retirement plan participants can buy stocks, mutual fund, and exchanged traded funds. The combinations are limitless.
These three types of funds allow me to keep annual costs as low as possible for my individual company 401(k) advice clients. Controlling costs is a big part of managing a company 401(k) retirement plan account.
The funds also allow an individual company 401(k) retirement plan participant to get the best annual investment returns available. The stock market environment is always changing. Your 401(k) fund choices have to be able to change along with the stock markets.
Ric Lager
Lager & Company, Inc.
