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My employer has changed their 401k
to include the following three options
for employees to participate in:

1) Selection of 10-12 good mutual funds, or

2) Have the plan administrator mix &
match your contributions for you.
(costs a little more than #1), or

3) Self-directed brokerage account
with Charles Schwab.
($50/quarter fee and $29/trade)

Is it Foolish to go with option #3 if
I wish to buy and hold my stocks ?
I'm not interested in day-trading
as I have 30+ years 'till retirement.

I am fully vested with the company
and have over $85k in the plan.
I contribute 15% and company puts in
6.5% (no limit).

Any advice would be appreciated.

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Well, I can offer a few thoughts. The main advantage with option 3 (self-directed 401K via Schwab) is that you do not limit your investment options. . .you can invest in individual stocks or mutual funds, etc. It really is no different than if you had an IRA with Schwab. However, I do not like the $50 per quarter ($200 per year) fee. What is this fee supposed to cover? It would seem to me the $29 dollar commission should be sufficient. I think you need to compare this $50 per quarter fee (percentage wise) against the amount you are contributing to the 401K . . .off the top of my head, it would seem to be a pretty steep fee.

If you are satisfied with the 12 mutual funds offered in your first option, this might be the simplest way to go and should provide a decent rate of return over the next 30 years . . .again, however, with Schwab you have unlimited choices of mutual funds.

Hope this gives you some food for thought.

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As the amount in your retirement fund increases, the importance of the $200 annual fee plus $29/trade decreases.
I'd take a good look at the 12 mutual funds. If they include good no-load index funds, probably better to go with the funds.
If the mutual funds are loaded, or have 12b-1 fees, and with $85K in your fund, I'd pony up the $200/year and make my own choices. A 5% load would be worse than the annual fee, especially since you will have management fees in the mutual funds but not with the Schwab account. If you are buying solid companies, once you have them there won't be any fees apart from that annual $200.
Best wishes, Chris
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If you're planning to buy and hold, the only fees you'll incur is the $200 annually.

Assuming you have $85,000 in your portfolio, that means it's an 0.24% annual fee, in line with what the best mutual funds will charge you. If your stocks do better than the market average, rejoice!

[Remember that since this money is pre-tax, any withdrawals from this plan will be taxed at your income tax rate at the time of retirement.]
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If you want or may want to take a plan loan, you may want to check with the plan administrator before you make your investment class allocation. The third option is often called a brokerage "window" account. Many plans with these accounts will not allow you to exercise you loan option for a period of one year.

The primary motivation which I might have to election option 3 is to purchase specific individual stocks. The $50 per quarter produces $200 per year. If your current account balance is 85K and you purchase 100 shares of 17 different companies with an average cost of $50 your transaction cost ($29) is $493.

Therefore, you can build a portfolio for less than $700 or 82 basis points, less than the average management fee of typical mutual funds

I hope this helps
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