TIPS Investment in 401(k): VIPSX, TIP, IPE?

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tsplinter
Posts: 31
Joined: Sun Jun 29, 2008 7:30 pm

TIPS Investment in 401(k): VIPSX, TIP, IPE?

Post by tsplinter »

To execute on asset allocation plan, I have to invest in TIPS in my 401(k) which is held in a brokerage account at Schwab. I am fairly well convinced that I do not have the attention span or interest to manage a portfolio of individual TIPS so I am considering plunging into one of the three low-cost funds: Vanguard Inflation Protected Securities Fund (VIPSX) (0.20% ER); iShares Barclays TIPS Fund (TIP) (0.20% ER); and SPDR Barclays Capital TIPS (IPE) (0.19% ER).

Schwab charges me $49.95 per transaction for mutual funds like VIPSX which are not part of their blessed inner circle and $12.95 for transactions in ETFs like TIP and IPE. Admiral funds are not available through Schwab, so I can't improve on the expense ratio by switching to VIAPX. Schwab, of course, has its own fund SWRSX with an expense ratio of 0.50%. For the initial purchase anyway, the savings on expense ratio for the lower costs funds would outweight the savings on transaction costs in purchasing Schwab's alternative.

Is it a toss-up among these funds, or is there a good reason to prefer one over the other?
Asterix
Posts: 116
Joined: Wed Nov 19, 2008 10:45 pm

Post by Asterix »

Were you to invest in the MF, Do you have the option of making scheduled contributions with less or no fee? If not, the MF seems least appealing.
Topic Author
tsplinter
Posts: 31
Joined: Sun Jun 29, 2008 7:30 pm

Post by tsplinter »

No. This self-directed 401(k) operates with Schwab's regular brokerage fee schedule so there are no breaks on transaction fees.

I realize that going forward, I will probably be best off investing my monthly contributions in the NO FEE Schwab Fund, maybe moving it into one of the other funds once a year.

However, my question isn't about how to handle the future contributions, but whether there is any reason to prefer one of these three funds to hold the substantial funds I already have in the 401(k).
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