The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: IRA capital gains convert to ordinary income Date:  4/15/1998  12:09 PM
Author:  PSUEngineerFool Number:  2847 of 88831

TMFPixy says

<<For a 401k to be better beyond the maximum match, the plan must offer some halfway decent options. Too many don't, thus making it fairly easy to outperform them in a taxable investment.>>

I have concerns with this statement. From my observations, most companies offer an index mutual fund. The taxable account needed to try to outperform the index would probably be several stocks (in essence creating your own mutual fund).

You make the assumption that most people will have the time and ability to be able to pick their own stocks and beat the S&P 500 when most professionals of managed mutual funds can't.

I think alot of people are blinded by the high flying tech stocks of this bull market. Today's darlings are Compaq and Dell. If you remember from the 1980's, Zeos and Wang were top computer companies. Zeos was bought out at a low price by Micron and Wang struggled until converting to a computer services company. Of course you can say the computer market is more mature today.

How about investing in established companies instead. You would lose to the S&P 500 with Sears and McDonalds. Everybody bought a Zenith TV when I grew up in the 70's. But I wouldn't want their stock.

Maybe everyone thought Borland would be like Microsoft since they dominated database software in the beginning. Poor choice there.

To beat an S&P 500 index fund in a 401(k), you must
1) do thorough research on each stock
2) constantly keep track of stock and company performance
3) always buy low and sell high
4) hope something unforeseen in the market doesn't screw up the first 3 steps.

Just an opinion.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us