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Author: MensaWhiteTrash Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19257  
Subject: 401k - Please help novice investor Date: 7/28/2000 3:08 PM
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Many years ago I got burned with two mutual funds and a limited partnership, and I swore off investing. However, my husband turns 50 this year, and we thought it might be time to consider a 401k. His company offers 11 different Vanguard funds, and kicks in 50% (in company stock). He's worked for the same company for 23 years, so his pension will be fairly good. Before now, our retirement "plan" was to pay down the mortgage. We currently have no debt and about $80,000 in home equity. My question: since his company's contribution to the 401k is all company stock, what should we include in our portfolio? Vanguard 500 Index Fund is one choice we have, as well as various other Vanguard stock, bond and money market funds. (As for retirement age: we have no idea. Could be in 5 years. Could be in 25 years. We have no children, so college tuition and heirs are not a concern.) Thank you very much for your help.
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4642 of 19257
Subject: Re: 401k - Please help novice investor Date: 7/28/2000 4:06 PM
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Many years ago I got burned with two mutual funds and a limited partnership, and I swore off investing. However, my husband turns 50 this year, and we thought it might be time to consider a 401k. His company offers 11 different Vanguard funds, and kicks in 50% (in company stock). He's worked for the same company for 23 years, so his pension will be fairly good. Before now, our retirement "plan" was to pay down the mortgage. We currently have no debt and about $80,000 in home equity. My question: since his company's contribution to the 401k is all company stock, what should we include in our portfolio? Vanguard 500 Index Fund is one choice we have, as well as various other Vanguard stock, bond and money market funds. (As for retirement age: we have no idea. Could be in 5 years. Could be in 25 years. We have no children, so college tuition and heirs are not a concern.) Thank you very much for your help.

When I started investing I went to a full service broker (only ones arround) and got bad advice. I stayed out of the market for a long time after that.

With a 50% match you are realy getting burned for not being in the 401k. Good that you see the light.

I would go with the Vanguard 500. I would not get any bonds, CD's etc. You have to many years to go and stock is the best long term investment.


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Author: PVFOOL Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4644 of 19257
Subject: Re: 401k - Please help novice investor Date: 7/29/2000 1:05 AM
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You are sooooo fortunate people. By all means, use the 401K as a means to increase your wealth. Don't try to get rich quick. Slooooowwwwwly will do just fine. In the meantime the S&P500 (or other index fund) will do the job. (don't be limited to the S&P 500, BTW. Diversify a bit into a few less "large cap" funds, as you go along.)

My &.02 (still the same low price!)
PVF

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Author: MensaWhiteTrash Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4645 of 19257
Subject: Re: 401k - Please help novice investor Date: 7/29/2000 9:36 AM
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<< Diversify a bit into a few less "large cap" funds, as you go along.>>

Hello PVF! Thank you for your reply. What is a large cap fund? Other choices I have are the Vanguard Wellington Fund, Margan Growth Fund, Windsor Fund, Mid-Cap Index Fund, Explorer Fund, International Growth Fund, and also four more that invest in several different Vanguard funds.


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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4650 of 19257
Subject: Re: 401k - Please help novice investor Date: 7/30/2000 3:11 AM
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<Many years ago I got burned with two mutual funds and a limited partnership, and I swore off investing. However, my husband turns 50 this year, and we thought it might be time to consider a 401k. His company offers 11 different Vanguard funds, and kicks in 50% (in company stock). He's worked for the same company for 23 years, so his pension will be fairly good. >


Where to begin? Well since this is only your second post, welcome to the FOOL. Fill out your profile. It can help people in giving you advice. Plus you can get a feel for the backgrounds or experience of the people who you are having discussions with.

That said it is obvious you have made two key blunders along the way. The first was making poor choices in investments. The second was deciding to stay out of the market after that. The number one rule for those looking to retire early (after LBYM) is to NEVER leave any money on the table. The 50% match that you have ignored for all these years is a key foundation on which early retirement is built! With the 401k, you get a nice tax deduction (federal and state), free money with the match and a great chance to narrow your retirement window to less than the 5-25 years you mention.

As for the pension, I would not hang my hat too heavily on that. Over the last few years countless companies have reorganized their pension plans. These changes generally help those with less than 15 years of service while royally screwing people with over 20 years. It pays to be totally aware of what is happening with his company's plan so you are not surprised down the road. This in turn is another reason for being in the 401k. Whatever you have in there is yours and can't be taken away on the whim of the company.

As for choices, if you are confused go with the simplest: the S&P 500 index fund (BTW you do not realize how good a plan he has by having Vanguard as a choice). If you had 10k invested 5 years ago it would be worth about 29k today. I wouldn't expect returns like we have had the last 5 years. However, you have a 50% return each year right off the bat.

Does your husband has some good friends at work who have been in the plan a long time? Have him ask a few how much they have put in and how much it is worth today. It may hurt to hear, but should really open your eyes. Good luck with your future choices.


BRG

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Author: LynnMP127 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4651 of 19257
Subject: Re: 401k - Please help novice investor Date: 7/30/2000 9:50 AM
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"What is a large cap fund? Other choices I have are the Vanguard Wellington Fund, Margan Growth Fund, Windsor Fund, Mid-Cap Index Fund, Explorer Fund, International Growth Fund, and also four more that invest in several different Vanguard funds."

If you don't have information about the funds from your administrator, check out the Vanguard web site:

http://majestic.vanguard.com/FP/DA



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