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Author: rumpole1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: Self-directed 401(k) Date: 8/20/1999 8:13 PM
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Hello:

My husband just set up a self-directed 401(k) with Charles Schwab.

He receives about $1,000 each month (his contribution and his empolyers matching) and an additional $5,000 in December for profit sharing. I'm not sure how we should invest this.

We use the Fool Four approach, which means we invest at the end of December. Should we be doing anything else, such as an index fund for the other months? The commissions are $35 to buy or sell shares in the index fund. Or should we just let the money stay in the money market fund -- it earns a little over 2% -- until the end of the year when we re-balance for the Fool Four method?

Thank you for any guidance you may give.

Warmly,
Chel

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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: 13317 of 75339
Subject: Re: Self-directed 401(k) Date: 8/21/1999 9:36 AM
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Greetings, Chel, and welcome. You wrote:

<<My husband just set up a self-directed 401(k) with Charles Schwab.

He receives about $1,000 each month (his contribution and his empolyers matching) and an additional $5,000 in December for profit sharing. I'm not sure how we should invest this.

We use the Fool Four approach, which means we invest at the end of December. Should we be doing anything else, such as an index fund for the other months? The commissions are $35 to buy or sell shares in the index fund. Or should we just let the money stay in the money market fund -- it earns a little over 2% -- until the end of the year when we re-balance for the Fool Four method?>>


The trading fee seems outrageous to me. My inclination would be to let the monthly deposits accumulate in the sweep account until the next trade date for the FF. They won't earn much, but the principal would be safe and you would avoid that 3.5% charge on your deposits each month.

Just one Fool's opinion FWIW.

Regards..Pixy

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Author: bluefrog37 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13325 of 75339
Subject: Re: Self-directed 401(k) Date: 8/21/1999 10:35 PM
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From my experience with Schwab (I have a rollover IRA), I can tell you that they have an extensive list of funds on which they charge no commission. While this may be different in your case, I would get a copy of their Performance Guide, which lists a large number of funds, many of which fall in the no-fee category. Vanguard funds do not fall in this category, but other index funds do. I would be quite surprised if you cannot find some appropriate fund where you can park your assets until you invest in individual stocks at the end of the year.

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Author: cable666 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13371 of 75339
Subject: Re: Self-directed 401(k) Date: 8/23/1999 5:23 PM
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>>He receives about $1,000 each month (his contribution and his empolyers matching) and an additional $5,000 in December for profit sharing. <<

Wow! That is $17k a year into pumped into his 401K. Doesn't that exceed the max contribution rules for a 401K?

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Author: bluefrog37 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13381 of 75339
Subject: Re: Self-directed 401(k) Date: 8/23/1999 7:53 PM
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I doubt it. As I understand it, the annual limits apply only to the amount that he is deducting from his gross, and not to employer contributions or profit sharing. I deduct the max that the law allows, and my employer has added 50% each of the past two years (it's a complex formula, but that is the bottom line) without any downside problem for me. And the advantage over a pension plan -- I don't have to wait years for it to fully vest. It's all mine -- NOW.

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