No. of Recommendations: 0
>> Does anyone know of a discount broker that will let me setup a 403(b) account? Schwab won't and I spoke to Smith Barney and they want 1.75% per trade if I do the Dow Dividend Approach. I'd have to open a unit trust to do that. What is a unit trust?
If this will help: the problem is that 403(b) accounts can only invest in annuities and mutual funds, and it is impossible for a diversified mutual fund to follow a Dow Dividend strategy.

The reason that a diversified mutual fund can't follow any kind of Dow Dividend approach is that a mutual fund has to arrange things so that, for a total of at least 75%, it has no more than 5% of its assets invested in a single company. The other 25% isn't subject to the 5% limit, so the effect is that a mutual fund must invest in at least 16 different stocks -- too many for a DDA.

One way that an investment company can get around this is with a unit trust, which operates somewhat like a mutual fund but isn't one and isn't subject to the diversification requirement. There is also at least one mutual fund that invests half its assets in a Dow 10 approach and the other half in the S&P 500, but in most cases the best you can do within a 403(b) plan is to invest in an S&P index fund.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
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.