No. of Recommendations: 0
I need some Foolish advice for a 401(k) plan. My company has a terrible selection of mutual funds. However, they do allow one to open up an account with Schwabb & I can then trade on my own. Currently, after getting slaughtered in the previous company managed fund, my holdings are down to a measly $7000. (I have been investing in this for only one year.)

Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500 fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k and to start with a foolish 4 based portfolio.


S&P 1yr=9.06 5yr=19.90
Vanguard 1yr=8.96 5yr=19.79 Fee=0.20
Schwabb 1yr=7.71 5yr=19.26 Fee=0.34

Any help would be appreciated.
Print the post Back To Top
No. of Recommendations: 0


Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will
be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just
stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee
for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500
fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k
and to start with a foolish 4 based portfolio.


My company has one of the Schwab accounts like yours does. I started a Foolish Four portfolio in February with $6000. I did $1500 in each of the companies which came out to a Foolishly recommended 2% transaction fee. I'm reinvesting the dividends and am up for the year ahead of the S&P 500. It's not the 35% gains of the past few years, but it seems to be working.

With a one year turnover (or 18 month if you prefer) I don't think that your profits will be all eaten up, especially if you get a big winner or two. You may end up having one or two stocks stay in the portfolio for another year too which will cut down on transaction fees.

Good luck either way!
Mike
Print the post Back To Top
No. of Recommendations: 0
Greetings, edesman, and welcome. You asked:

I need some Foolish advice for a 401(k) plan. My company has a terrible selection of mutual funds. However, they do allow one to open up an account with Schwabb & I can then trade on my own. Currently, after getting slaughtered in the previous company managed fund, my holdings are down to a measly $7000. (I have been investing in this for only one year.)

Here is the problem: With the little cash I currently have, I think any profits of a fool 4 approach will be eaten up by the $30 transaction fee for each buy/sell with Schwabb. My alternate plan was to just stash the dough into an index 500 fund. NOW, if I invest in the Schwabb index fund, there is no fee for the transaction and all of my money will go into the fund, whereas if I invest in the Vanguard 500 fund, there will be a $30 charge. I plan to keep the $ in the fund until I have accumulated about 20k and to start with a foolish 4 based portfolio.


With $7K and a charge of $30 per trade it seems to me you have enough now to start a Foolish Four portfolio. In the first year it will cost you $120 to buy the initial shares. That's 1.7% of your portfolo, which is well within the range of the 2% to 2.5% maximum trading costs we adhere to in Fooldom. On average, you will have two buys and to sells on your trading anniversary dates, or four trades for $120. Even if you add no further money to the account, you'll stay within the limit. And, as your account grows those trades will represent less and less as a cost percentage on the portfolio total.

Regards…..Pixy


Print the post Back To Top
Advertisement