Find the Cheapest Effective Funds

August 11th, 2008  |  Published in 401K  |  1 Comment

Not all 401(k) programs are created equal, that’s a fact I’ve known for quite some time and one cemented after reviewing The Smartest 401(k) Book You?ll Ever Read by Daniel Solin this past weekend. While the idea that 401(k) plan administrators may pay kickbacks to companies turns your stomach, the reality is that it occurs and we must adjust to the world we live in.

So, what can you do? Review your company’s 401(k) plan options and find the cheapest funds that satisfy your needs. The best options are those that most closely mimic index funds, such as the S&P 500 Index or a Total Market Index fund. It’s best to avoid the actively managed funds as the vast majority of those can’t even beat their benchmarks, let alone earn enough to beat it after the fees.

You can’t control the fund options but you can control how much you pay in fees with your fund selection.

  

Responses

  1. Frugal Babe » Archive » Welcome To The 142nd Festival Of Frugality says:

    September 9th, 2008 at 12:54 am (#)

    […] Happy from My Retirement Blog writes about finding the cheapest effective funds.  The key? – look for index funds and low […]