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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 :)


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