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Comment by the_watcher | Hacker News Reader

Yea, my biggest problem with my employer 401k is that I can't just invest in a Vanguard low fee fund, but I have to use their 401k management to get my matching funds.

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I once had an employer who gave away .5% of my 401k every year to a no value add consultant who selected the overpriced funds. I lost 1% every year I didn't roll into an IRA, but it beat having the principal taxed @ 25%.

I wonder where the inflection point is where you are better off investing after tax.

Annoying, isn't it? Every time Frontline or one of the major networks runs a scare story about how much money people are losing due to high fee 401k plans, I get angry. Not so much at the lost money, but that the 'in-depth journalism' never seems to bother with any suggestions on what to do if you're in one of those crummy plans. (To be fair, I guess "quit and go to work for Google or Goldman" wouldn't go over well, either...)

http://www.bogleheads.org/wiki/How_to_campaign_for_a_better_...

This of it another way. If you put in the least amount possible to max the matching (often 50% of first 6%) and put it into a money market or stable value fund then the "return" (the matching) will exceed the market returns you'd get on any index fund.

That seems like a complete conflict of interest. Do you mean that they require you to have your account managed, for a fee, in order to get matching funds?

No, we just have to choose from a list of funds that are in our Fidelity account. I just pick the one with the lowest fees, but they aren't quite as good as a Vanguard fund.

Well, that's exactly what Kivalia does; helps you decide which funds to own at any point in time - and how to combine them. Of course you have to create the list at Kivalia, but then you're good to go - immediately and quarter after quarter.

That doesn't let me invest in a Vanguard fund. I already know to just pick the funds with the lowest fees.

Low fees are clearly better than higher fees, but you probably won't be able to build a very diversified portfolio based on selecting investments based solely on fees. For example,international investments will always be more expensive than domestic, small caps will be pricier than large, etc.

If you're selecting lowest fee fund within specific classes, that will probably serve you relatively well...of course then you need to weight the fund classes. How do you handle that decision?

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