| What is the best way to configure my 401K-Mom VS Friend? |
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snapmacro
Member
Cash: $ 3.30
Posts: 15
Joined: 01 Feb 2007
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| What is the best way to configure my 401K-Mom VS Friend? |
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My mother things I should invest in high-risk managed funds focusing particularly on international funds. Here is her advice:
50 %: Oakmark Int'l II......this is doing very well and listed as one
of the top 7 in its field. I would put half my money in that now. This
if for International stocks......
25%: Ariel Appreciation...this is ranked lower but still
recommended. This is a mid-cap appreciation fund.
15% American Funds Growth Fund of America R3...This is a safe investment
and has a 6% load, I think, but you need to have something conservative.
10% PIMCO Total Return Admin.....This is a bond fund and invests in
intermediate term corporate bunds. This is also safe.
A friend of mine completely disagrees. He thinks that managed funds are a waste of money and historically will always be beaten by index funds because of the fees associated with managing them.
He recommends putting 100% of my 401(k) into a S&P 500 Index fund (the one offered me is "Maxim S&P 500 Index").
Or if I want, he says I can put 25% in Maxim 600 Index which is a small cap index. He also says there is no point in investing in a bond fund or bond index fund because I am so young and I can tolerate more risk.
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Fri Feb 02, 2007 11:05 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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Int'l funds have done very well in recent years, but there is some question whether that will continue. When people chase gains and pile on, things can get overheated and retrace. But even though our best int'l fund has been volitile, it has averaged 24.2% over past 5 yrs vs. 6.4% for our large cap index fund (approximating S&P 500) and 16.8% vs. 7.5% for past 10 yrs, so it can be tempting.
In 2006 large and small cap did well, but were still surpassed by int'l, with mid-caps lanquishing. So far this year, my mid-cap value and blend funds have pulled ahead of the pack (ahead of int'l). Growth funds are starting to do well, but did that last year, then pulled way back, and have lower long term average than our blend or value funds.
I would be cautious about funds with a load unless they do better after factoring in the load than similar no-load funds.
Unless you get into risker bond funds, they may not currently pay any more than safer money market funds or CD's. Something people do not realize until it happens to them is that bond funds can lose money (when others pull out at a bad time and fund is forced to sell bonds at a loss).
But it is hard to make generalizations or predictions because only 10-20% of managed mutual funds beat their related index (there are many indexes), and nobody makes the best decisions all of the time. So you do want to have some diversification in case things change unexpectedly.
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Sat Feb 03, 2007 12:17 am |
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