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Author: AliFool 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 75381  
Subject: Re: 401K Mutual Fund Question Date: 12/8/1998 6:14 PM
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TMFPixy... you said:

With decades to go before retirement, you're right IMHO about staying with stocks. But why think of anything else except the Vanguard 500?

Well, my guess is for the same reason that people start to buy small-cap stocks after they've invested in some nice blue-chips. Does that make sense? With an S&P 500 fund, I will never be exposed to smaller/newer companies. (I know that this could be very GOOD, potentially!)

We have said over and over and over that history shows over and over and over that the Vanguard 500 literally trashes the vast majority of managed stock funds over the long term. That includes other Vanguard funds.

Yes, then why do the various Fool Ports exist? I know that they are about picking individual stocks, which I cannot do in my 401K... but still. Why would there be ANY need for anything other than the S&P 500 fund, then?

Therefore, I ask again: Why choose something else in the hopes it might do better?

So as not to have all my eggs in one basket, even if it is a diversified basket of the 500 largest companies?!

In all probability all that will happen is your total return will be diminished because of that so-called "diversity." When it comes to index funds of any stripe (small cap, total, you name it), the Vanguard 500 is king. If your objective is growth, then go for it with a proven quantity you don't have to worry about.

What about the old adage: "Past performance is no guarantee of future return"?!

Just one Fool's thought FWIW. Regards….Pixy

Thanks, Pixy. Your insight is very helpful. My instinct is to sell off my other funds and put it all into the S&P 500 fund, before the "freeze" that will occur while they switch over our plan. I will feel a little weird to have so much of my (very limited!) worth in one particular fund... but I guess I can look at it as the "largest 500 stocks." : ) In some ways, they've already proven themselves to be winners.

I guess I can do my stock-picking outside my 401K -- in my Roth IRA. But is it Foolish to pick small-caps there?! Or would it be better just to pick up more of my favorites of the same blue-chips that will be in the S&P 500 fund (keeping in mind that I have literally decades 'til retirement)?

Cheers!

--AliFool
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