Poll: Anyone invest in 401(k) ? Vote for a Fund

[viewton]

I'm 22, and I'd like to start investing in 401(k). I have a choice of a few Funds though, and I'm not sure which to choose from. I think I'm young enough to go for a moderate-high risk fund, but I'm not sure which one...so please take the poll

Here are the choices in the poll (safest to riskiest funds in order from top to bottom):

Investment Option-----------------------------------------------Asset Class--------------------1 yr Avg Annual Total Return-------3 yrs-------5 yrs

Merrill Lynch Retirement Preservation Trust----------Stable Value (Cash and Equivalent)---------6.44%---------------------6.34%---------6.32%
State St. Research Govt Income Fund (Class A)----Govt Bond Fund (Bond)-------------------------10.94%--------------------5.47%---------6.84%
AIM International Equity Fund (Class A)----------------International Equity (Stocks)--------------__ -24.50%---------------__-1.30%---------5.38%
Davis NY Venture Fund, Inc. (Class A)-----------------Large Cap Equity (Stocks)----------------__ -1.96%----------------------9.83%---------17.44%
Franklin Small Cap Growth II (Class A)----------------Small Cap Growth (Stocks)-------------------7.14%----------------------=====----------======
Mass. Investors Growth Stock Fund (Class A)-------Large Cap Growth (Stocks)--------------__ -18.99%---------------------9.90%---------19.43%
Merrill Lynch Equity Index Trust---------------------------S&P 500 Index (Stocks)-------------------__ -10.79%---------------------5.86%---------14.82%
MFS Capital Opportunities Fund (Class A)------------Mid Cap Equity-------------------------------___-15.66%-------------------11.71%--------16.26%

 

[viewton]

^bump b/c I don't want to work at Wal-Mart as a stockboy when I'm 80

 

[mithrandir2001]

If you are looking for the best "moderate-high risk" fund, go with the Merrill Lynch Equity Index Fund. Index funds rule, active funds are for weenies.

I'm assuming that those funds listed above make up all of your plan's choices. In that case, I recommend:

60% Merrill Lynch Equity Index Fund
10% MFS Capital Opportunities Fund
10% Franklin Small Cap Growth II
10% AIM International Equity Fund
10% State St. Research Govt Income Fund

This gives you broad exposure and diversification with a main emphasis on the passively-managed (index) fund.

 

[viewton]

thanks for the advice mirthrandir. I didn't realize you could divide investments in 401(k) into multiple funds like that.

 

[riddelrp]

Yeah, I would go with the "Mass. Investors Growth Stock Fund (Class A)", because I am 19, in college, know nothing about 401K stuff and it has the highest 5 yr avg.

Might not want to take my advice !

-Ryan

 

[Lvis]

The index fund would be fine, the important thing is to just get into the plan. Starting at your age you can get a heck of a head start on your retirement plans.

Yes, you are a long way from retirement, but by starting now, you'll likely have no long term money worries later. (like when you get in your thirtys)

 

[mithrandir2001]

<< thanks for the advice mirthrandir. I didn't realize you could divide investments in 401(k) into multiple funds like that. >>


That's the convenience of 401(k)s...you can invest in funds that you otherwise wouldn't have access to (e.g. minimum investment amounts) and your employer foots the administration bill.



<< Yeah, I would go with the &quot;Mass. Investors Growth Stock Fund (Class A)&quot;, because I am 19, in college, know nothing about 401K stuff and it has the highest 5 yr avg. >>


A lot of people look at previous performance and pick the fund with the highest return. That's one way to get burnt. It is a very rare for a fund to do exceptionally year after year after year. Many hot funds turn into cold funds (technology funds) and some cold funds turn into hot funds (value funds). Because it is such a crapshoot, you are wise to invest in a wide variety of sectors (so that you don't have to guess what sector is going to do the best...you own them all) and stick the index funds (so that you can't get screwed if the analysts make a lot of bad stock choices...an index fund owns &quot;everything&quot. My recommended portfolio is not one that will perform incredibly one year to another...it is an portfolio that over time will build wealth in a sustainable, &quot;predictable&quot; and fairly aggressive fashion.

 

[arcain]

Fool.com: Foolish 401(k)

I vote for the index fund.