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Subject:  Re: 401(k) and foolishness revisited Date:  4/15/1998  9:08 AM
Author:  Rayvt Number:  2840 of 88520

<< My company is nice enough to match the first 3% of my contribution 100% and the next 3% contribution is matched 25%. If I invest 6% I get a free 3.25% from the company. You don't have to be a Fool to understand it's
free money but should I invest the full 15%? or just the 6% and take my other 9% elsewhere? >>

I believe that, in general, the optimal ordering would be:
1) deductible IRA (if eligible)
2) 401(k), enough to capture the entire employer match
3) Roth IRA (if you can't do #1)
4) Max out the balance of the 401(k)
5) ordinary taxable account.

<<Striking Mutual Funds from the list leaves the following investment opportunities:>>

But what you listed _is_ mutual funds! DO you perhaps mean "striking commercial funds"?

<<Indexed Stock Fund: All 500 stocks that make up the S&P 500.
Growth Stock Fund: Well-established, dividend paying stocks whose performance is EXPECTED to meet or exceed the S&P 500 Index.
Windsor Stock Fund:>>

FWIW, almost _all_ mutual funds "expect" to meet or exceed the S&P500. Only about 20% do in any year, however. This should give you an indication of how much weight to put on this claim.

Our choices at Motorola are even more limited. What many people (including myself) do is to invest my entire 401k into the least unattractive of the available options. For us, this is the so-called "equity fund", which is essentially an S&P500 index fund. Interestingly enough, the expense ratio of this is less that half of the Vanguard S&P500 index fund--which is very highly regarded do to it's low expenses.

Now that the "index fund" portion of my asset allocation is taken care of, I put the rest of my money into other strategies--DDA, Formula90, Keystone, etc.

Good luck,

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