403b options- equally-weighted fund

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
uberdoc
Posts: 183
Joined: Sat Jan 20, 2018 4:37 pm

403b options- equally-weighted fund

Post by uberdoc »

Hi,
My current employer's 403b plan is not one of the best. I am planning to enroll soon. I will appreciate if you could provide some advice about these options:
Invesco equally-weighted S&P 500 fund class R- ER 0.77%
Invesco S&P 500 fund- only class A is available which likely has a load fee with an ER of 0.55%.

All other options are active funds and highly egregious. Within a year or so I will definitely join another employer with hopefully a better 401K plan.

Thank you.
User avatar
David Jay
Posts: 9409
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: 403b options- equally-weighted fund

Post by David Jay »

If the load is under 1%, I would use the SP500 fund. An equally weighted fund incurs too much risk of under-performing the market (just a handful of companies account for most of the index growth in any given year).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
jimkinny
Posts: 1436
Joined: Sun Mar 14, 2010 1:51 pm

Re: 403b options- equally-weighted fund

Post by jimkinny »

I too would choose the SP 500 index fund. The equal weight has more risk and while it is true it may potentially underperform the 500 index, with its higher risk it has the potential to have higher returns over the long term. The higher the risk, the higher the potential returns.

Look into rolling the 401k into a TIRA if you do leave this employer. There is a theoretical downside in that a TIRA may not have the same protections as a 401k in a lawsuit. I don't know if that is true or just something that people think is true.
Topic Author
uberdoc
Posts: 183
Joined: Sat Jan 20, 2018 4:37 pm

Re: 403b options- equally-weighted fund

Post by uberdoc »

Load is 5% for the S&P 500 fund. That leaves equity weighted fund as the only option.
Overall my portfolio has 12% less mid caps in comparison to total stock market and its due to S&P 500 fund in my old 401K. Do you think equity weighted fund can help in balancing my portfolio by adding more mid caps?
User avatar
grabiner
Advisory Board
Posts: 27960
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: 403b options- equally-weighted fund

Post by grabiner »

An equally-weighted S&P 500 fund behaves like a mid-cap fund, and can be treated as one in your asset allocation. Thus, as long as you have large-caps in your old 401(k) or IRA, it's reasonable to use the equally-weighted fund.

You may also want to add a small-cap fund in your IRA if you are trying to match the total stock market.
Wiki David Grabiner
Post Reply