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Author: Quinapalus Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75794  
Subject: 403(b) discount brokers Date: 4/24/1998 12:39 PM
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<<Two questions:

Does anyone know of a discount broker that will let me setup a 403(b) account? Schwab won't
and I spoke to Smith Barney and they want 1.75% per trade if I do the Dow Dividend Approach.
I'd have to open a unit trust to do that. What is a unit trust?>>
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3030 of 75794
Subject: Re: 403(b) discount brokers Date: 4/25/1998 11:53 AM
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Greetings, Quinapalus, and welcome.

<<Two questions:

Does anyone know of a discount broker that will let me setup a 403(b) account? Schwab won't and I spoke to Smith Barney and they want 1.75% per trade if I do the Dow Dividend Approach.I'd have to open a unit trust to do that. What is a unit trust?>>

A unit trust is a vehicle that invests in a fixed portfolio of securities. You buy a share of that portfolio and must hold that share until the trust expires, anywhere from six months or many years later. It is similar to a mutual fund, but the shares you own in the trust are not readily marketable for the most part.

As to your 403b account, I can't tell from your question what you are trying to do. However, both Vanguard and Fidelity accept 403b accounts in something called a 403b(7) arrangement. Also, you should be aware that with a 403b your investments are limited to just two things: annuities and/or mutual funds. Individual stocks don't qualify (and neither do unit trusts to my knowledge). If you want to use a Dow strategy, you'll have to wait until you can transfer the money to an IRA to do that. That option is available when you leave the employer sponsoring the 403b when you quit or retire.

Regards….Pixy


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Author: TchrP Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3059 of 75794
Subject: Re: 403(b) discount brokers Date: 4/26/1998 11:10 PM
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>> Does anyone know of a discount broker that will let me setup a 403(b) account? Schwab won't and I spoke to Smith Barney and they want 1.75% per trade if I do the Dow Dividend Approach. I'd have to open a unit trust to do that. What is a unit trust?
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If this will help: the problem is that 403(b) accounts can only invest in annuities and mutual funds, and it is impossible for a diversified mutual fund to follow a Dow Dividend strategy.

The reason that a diversified mutual fund can't follow any kind of Dow Dividend approach is that a mutual fund has to arrange things so that, for a total of at least 75%, it has no more than 5% of its assets invested in a single company. The other 25% isn't subject to the 5% limit, so the effect is that a mutual fund must invest in at least 16 different stocks -- too many for a DDA.

One way that an investment company can get around this is with a unit trust, which operates somewhat like a mutual fund but isn't one and isn't subject to the diversification requirement. There is also at least one mutual fund that invests half its assets in a Dow 10 approach and the other half in the S&P 500, but in most cases the best you can do within a 403(b) plan is to invest in an S&P index fund.

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