High turnover funds in 401K?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Jesteroftheswamp
Posts: 155
Joined: Fri Sep 02, 2016 4:25 pm

High turnover funds in 401K?

Post by Jesteroftheswamp » Mon Apr 15, 2019 2:03 pm

Does one pay taxes yearly on index funds that have high turnover if they are in a 401k, or are taxes only paid upon withdrawal?

User avatar
David Jay
Posts: 6460
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: High turnover funds in 401K?

Post by David Jay » Mon Apr 15, 2019 2:56 pm

You pay no taxes on 401K assets until withdrawal.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
cheese_breath
Posts: 8471
Joined: Wed Sep 14, 2011 7:08 pm

Re: High turnover funds in 401K?

Post by cheese_breath » Mon Apr 15, 2019 2:59 pm

However, high turnover funds may be trying to time the market and will have higher expenses than passive index funds.
The surest way to know the future is when it becomes the past.

User avatar
David Jay
Posts: 6460
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: High turnover funds in 401K?

Post by David Jay » Tue Apr 16, 2019 10:02 am

cheese_breath wrote:
Mon Apr 15, 2019 2:59 pm
However, high turnover funds may be trying to time the market and will have higher expenses than passive index funds.
It can sometimes hard to find the ER (expense ratio) of your 401K choices (they never it put on the first page, you have to dig it out) but It is a huge determinant of performance. Costs matter. Find the low cost index funds in your 401K.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
Jesteroftheswamp
Posts: 155
Joined: Fri Sep 02, 2016 4:25 pm

Re: High turnover funds in 401K?

Post by Jesteroftheswamp » Tue Apr 16, 2019 7:14 pm

David Jay wrote:
Tue Apr 16, 2019 10:02 am
cheese_breath wrote:
Mon Apr 15, 2019 2:59 pm
However, high turnover funds may be trying to time the market and will have higher expenses than passive index funds.
It can sometimes hard to find the ER (expense ratio) of your 401K choices (they never it put on the first page, you have to dig it out) but It is a huge determinant of performance. Costs matter. Find the low cost index funds in your 401K.


What should one do if they cannot change their 401k holdings?

User avatar
David Jay
Posts: 6460
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: High turnover funds in 401K?

Post by David Jay » Tue Apr 16, 2019 7:32 pm

Jesteroftheswamp wrote:
Tue Apr 16, 2019 7:14 pm
David Jay wrote:
Tue Apr 16, 2019 10:02 am
cheese_breath wrote:
Mon Apr 15, 2019 2:59 pm
However, high turnover funds may be trying to time the market and will have higher expenses than passive index funds.
It can sometimes hard to find the ER (expense ratio) of your 401K choices (they never it put on the first page, you have to dig it out) but It is a huge determinant of performance. Costs matter. Find the low cost index funds in your 401K.


What should one do if they cannot change their 401k holdings?
Please explain. Your employer has a 401K plan that offers no choices whatsoever?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
Nate79
Posts: 4247
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: High turnover funds in 401K?

Post by Nate79 » Tue Apr 16, 2019 9:46 pm

High turnover can also mean a lot of trading cost within the fund which is not included in the expense ratio.

averagedude
Posts: 591
Joined: Sun May 13, 2018 3:41 pm

Re: High turnover funds in 401K?

Post by averagedude » Tue Apr 16, 2019 9:57 pm

High turnover means nothing inside of a tax deferred account, but tax efficient funds do have higher correlations to better returns according to academic research.

User avatar
cheese_breath
Posts: 8471
Joined: Wed Sep 14, 2011 7:08 pm

Re: High turnover funds in 401K?

Post by cheese_breath » Wed Apr 17, 2019 7:54 am

averagedude wrote:
Tue Apr 16, 2019 9:57 pm
High turnover means nothing inside of a tax deferred account, but tax efficient funds do have higher correlations to better returns according to academic research.
High turnover means more trading expenses whether the account is tax deferred or not.
The surest way to know the future is when it becomes the past.

Post Reply