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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75540  
Subject: Re: Help me flesh out my 401k Date: 3/1/2009 3:01 PM
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I applaud your interest in self-management of your 401(k) and your interest in holding individual stocks. This is by far the best way to circumvent all of those management/MF fees that over your working career can eat up much of your retirement plan's investment earnings.

But there is no free lunch....to pick individual stocks and beat the indexes over the years ahead, you're going to have to invest a good portion of your time to get smart on intelligent stock picking. Stock tips, airwave pundits and last month's winners are a sure way to finish well behind the indexes. You're going to operate like a machine: dig, dig and dig some more, run lots of calculations, endlessly read prospectii and annual reports and some 3rd party analysis, to find companies with the right management, in the right field, the right financing and at the right time. And I'm not too fond of 'newsletters', as there's simply too much opportunity for interest conflicts and by the time the 'buy' recommendation reaches you, thousands of other professional investment managers have already made their buy/sell decision the investment newsletter's recommendation is being based on. There simply is no short cut to the work you've got to put in to reduce the investment risk in your stock choices.

The alternative to this that most self-managers are choosing these days are ETF's for various industries or even subsectors. You do have a modest fee (typically <25bp, some as low as 5bp), you still have to pick those sectors that are well diversified and you will give up the chance (and some say random chance) that you'd pick another Microsoft with a huge run-up...but ETFs will save you the hundreds of research hours you'd otherwise have to spend finding those individual stocks.

BruceM
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