Does it matter which equity index fund I put my money into, if my company offers more than one?
ajith24 asked:Does it matter which equity index fund I put my money into, if my company offers more than one? Yes it does. You first need to know what index each fund tracks. Then you need to know how well it tracks its respective index. Avoid index funds with high fees and expense ratios (A gauge could be Vanguard's VFINX, which has an expense ratio of .18%). Most index funds either track the S&P 500 or the Wilshire 5000. There are also international index funds, mid-cap and small cap funds, and some retirement plans offer a choice of some of the Russell (3000, 2000, 1000 growth or 1000 value) index funds. There are plenty out there, and there are differences.Here are a few links to better explain some of those indexes, see:http://www.fool.com/school/mutualfunds/indexfunds/beyond.htmhttp://www.fool.com/school/mutualfunds/indexfunds/sp500.htmThere are also differences among the mutual fund companies that offer them. Some have lower expense ratios than others, Some have 12b-1 fees (Not Foolish). If you provide the specific funds you're offerred, we may be able to provide you with some better direction, or at least what each index contains. HTHBmF
there are different index funds. s & p 500 , growth , value, mid -cap , small-cap, international , bonds, ect......... the most widely used is the s&p 500. you may want to consider a mix of them - example, 25 % s&p 500, 25 % growth, 25% value , 25 % mid-cap. find a percentage you like . only you know how much risk you are willing to except.have fun and Fool-On .!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! lunarpatrol
I wrote:Most index funds either track the S&P 500 or the Wilshire 5000. There are also international index funds, mid-cap and small cap funds, and some retirement plans offer a choice of some of the Russell (3000, 2000, 1000 growth or 1000 value) index funds. There are plenty out there, and there are differences.And then lunarpatrol wrote:there are different index funds. s & p 500 , growth , value, mid -cap , small-cap, international , bonds, ect......... the most widely used is the s&p 500.Pretty strong echo around here, ay lunarpatrol? lolBmF
I realize I'm several months behind on this discussion, but I've just become a Fool-in-training.BmF suggested that if ajith24 "provide the specific funds you're offerred, we may be able to provide you with some better direction, or at least what each index contains." I couldn't find whether ajith24 ever responded, but I have a similar situation in my 401(k). My employer offers two index funds:* SSgA Russell 1000 Value Index Fund* SSgA S&P 500 Flagship FundAccording to the literature, the average expense ratio for the Value Index Fund is .04%; that for the S&P Fund is .02%. My employer matches 100% on the first 6% of my contributions, and I've got 30 years to retirement. Should I split my contributions equally between the two funds offered, stick exclusively to one or the other, or follow some other ratio? Thanks for the input.McD
Hello mmcdona,I'm assuming the S&P fund you mentioned is called the SSgA S&P 500 Index Fund, and the ticker symbol is SVSPX. That's the only S&P fund of theirs I could find. Look at the link below to see if this is your fund:http://moneycentral.msn.com/investor/partsub/funds/overview.asp?Symbol=SVSPX&There are 2 ways to look at an S&P 500 fund. One is that this fund invests in 500 of the biggest US companies (for the most part), which comprises about 75% of the US equity market. But this is not in equal market shares, this is a weighted index. Hence, the other way of looking at this is that the top 25 companies (holdings) make up the majority of the index. Someone here once said it's like investing in a large cap fund made up primarily of 25 companies, with the remaining 475 companies splitting up the rest. So yes, you are invested in some portion of those 500 companies, but the #1 holding in the index makes up, say about 2% of the fund, but the #50 holding has maybe a fractional percentage. It's not an equal weighting. It's also categorized as a large blend, meaning a mix of value stocks and growth stocks. I believe more slanted towards growth now.The Russell fund is as its name states, a value fund, comprised of companies in the Russell 1000 with a lower P/E ratio. If you own both funds, you will have some overlap, but with equity funds, that's almost impossible to avoid in most cases. I did a comparison on my own several months back, and found that a little over 200 of the companies in the S&P 500 were also in the Russell 1000 value fund. If you'd like, I could email you the specifics of my findings. IMHO, I would have no problem placing a portion of my retirement money in both funds. Exactly what %'s you chose will be entirely up to you. As it's been said here before, you money, your choice.HTHBmF
TO: mmcdonaI am not familiar with either index fund but would suggest that you go with the one which generates the highest RETURN TO YOU. To me, the difference between .04% and .02% expense ratio is in the "noise". IMO, allocation ratio with 30 years to retirement should not be a big concern. Further, most 401K plans allow you to change your asset allocation in future years if you decide to do so. Instead, suggest you should be striving for maximum return during your earlier years so that compound growth will have maximum effect before retirement. As you get within ten years or so of retirement, you can begin worrying about financial safety and asset allocation.
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