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Okapi asks:

I'm eligible for my company's 401k now. They match up to 4% so it's a given I'm going to put that much in. I'm confused about whether I should put more in. There's no index fund option. The closest I can see are Sequoia and Fidelity Growth & Income, or my company's stock (Disney). Both lag the S&P by a % or so from my initial research, Disney have overall performed better, though its stock's in the ground now.

Does it make sense to max on those or to use my after tax income to do something else. I've read the Fool guidelines about calculating if you can get a better investment somewhere else, but I'm not sure what to use as the better invstment benchmark. The Fool 4? One of the higher mechanical growth strategies?

And does anyone have any views about Sequoia and Fidelity G&I?


You can research both these funds at www.morningstar.com to see their long-term performance and make your choice based on that data. As to going beyond the 4%, the guidelines I outline in Step 4 of the 13 Steps to Foolish Retirement Planning say to compare the returns of your 401k options to those of other alternatives. The formula gives you the rate of return you need outside of the 401k to equal the return you're getting within it. It accounts for taxes. Therefore, after you decide on the return you think you'll get in the 401k, use the formula. That gives you the return you need outside of the 401k to equal the return within it. Use that number to see if the projected return of your alternative equals or exceeds the return provided by the formula. You have to pick the alternative, and you have to decide what you think it's average return will be. Thus, whatever you select as your alternative to the 401k is your benchmark return.

Regards…..Pixy
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