Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Our 401k provider (Prudential) has expense ratio's higher than 1.5% on pretty much all their funds, and on the two equity funds that I'm investing in an expense ratio of 1.62% and 2.12%.

Also, all the funds seem to have a 5% deferred sales charge.

TMF tells me to look for funds that have:
-Low management fees (below 0.75%)
-No sales charges (also known as loads or commissions)
-No 12b-1 fees
-Turnover no higher than 40% a year
-Established track record
-Consistency of return

1) Is the expense ratio the 'management fees', meaning that each year, 1.62% (and 2.12%) of my investment is given to the managers of the funds? Seems pretty steep.

2) Deferred sales charge. Does that mean that when I retire and take the money out of the fund, 5% of the total goes to Prudential?

------------

As our company does not currently match any contributions to 401k, and as the funds provided by Prudential don't seem to be all that great (yet...), the high sales charges now make me wonder...

Are the gains of a 401k plan with funds like this (high sale charges) worth it?

Is the only difference between finding stocks/funds to invest in on my own and contributing to a company 401k the tax benefit? (which, eventually, I'll have to pay when I retire).

Should I
a) accept the fact that a company 401k is just a really good thing, even when it comes with high sales charges and so-so funds?
b) do more research and only contribute small amounts to company 401k until I know more?

Thanks for your patience... I AM learning :)

VeryYoungFool


Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.