My company will soon offer the option of putting up to 50% of one's 401-K contribution into a self-directed account, where one could buy and sell individual stocks (as opposed to the usual, mutual fund-only choices).Sounds good at first glance, but the account incurs a $100 annual maintenance fee, and trades are $20 each. This strikes me as excessive - both in absolute terms as well as a percentage of the amount an average employee would annually contibute.For instance, lets say someone making $50,000 a year elects to put aside 3% in the account. The $100 takes almost 7% out of that investment - this works just like the broker-sold funds which do nobody any good.Does anyone have this option in their 401-K, and -if so - what kind of fees are associated with it?Thanks.
The problem you mention is a common one with 401K plans that allow stock market investments. Usually the costs are rather high. Therefore, you are best off to keep your 401K funds in mutual funds or the other investment choices unless 1) the choices offer poor performance or high fees or 2) you are skilled at picking stocks that produce high rates of return.
My company's plan (managed my Merrill Lynch) just added this option. The yearly fee is $125. It allows you to invest it a lot more no-transaction-fee funds, and in individual stocks. They haven't decided yet what stock trades will cost, but they will probably be about $30.
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