Between rock and hard place in 401k large cap

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Kelly
Posts: 255
Joined: Sun Nov 18, 2012 7:39 am

Between rock and hard place in 401k large cap

Post by Kelly » Sun Oct 25, 2015 1:09 pm

Folks,

What's the better of these two bad options for 401k large cap: Principal SP 500 index at 0.70% ER or American Funds Fundamental Investor R (RFNCX) at 0.96% ER (large blend). The American Funds 3 and 5 year returns would be worse than the Principal SP 500. Other time periods it's better. Here's RFNCX at M* http://performance.morningstar.com/fund ... ture=en_US

Do I pay 0.27% more in the hopes that American Funds outperforms the Principal?

Many thanks

Kelly

livesoft
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Re: Between rock and hard place in 401k large cap

Post by livesoft » Sun Oct 25, 2015 1:15 pm

I'd look at my asset allocation instead of at these funds. If you can get the "outperforms" by using an extended market fund elsewhere, then I would use the S&P500 index fund.
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Twins Fan
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Joined: Fri Mar 08, 2013 1:02 pm

Re: Between rock and hard place in 401k large cap

Post by Twins Fan » Sun Oct 25, 2015 2:07 pm

Kelly wrote:Do I pay 0.27% more in the hopes that American Funds outperforms the Principal?
No. :happy

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jeffyscott
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Location: Wisconsin

Re: Between rock and hard place in 401k large cap

Post by jeffyscott » Mon Oct 26, 2015 4:44 pm

I don't think fund managers are worthless, I just think most charge too much. While 0.96% is too much, 0.70% is also way too much for running an index fund. I think I'd probably pay American Funds the extra 0.27% in the hopes that the fund continues to outperform over the long term. Note that the American Fund is also giving you a sliver of international stocks.

M* review of RFNCX notes that: "From Perry’s March 1993 start date through March 2015, the fund’s 10-year rolling returns beat those of both the index and typical category peer in every one of roughly 150 periods."
press on, regardless - John C. Bogle

retiredjg
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Re: Between rock and hard place in 401k large cap

Post by retiredjg » Mon Oct 26, 2015 4:54 pm

I would probably use the 500 index. I would definitely use the 500 index if you have to pay a front end load for the American Funds fund. Apparently that fund has a high expense ratio to make up for the lack of a front end load.

Since the American Funds fund is a combination of US stocks and international stocks, I would not use it - just clutters up the works when looking at your asset allocation.

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