offerings for his youngest daughter's 401k and shared his thinking on fund choices and asset allocation. The critical factor in this whole process, when it got to the actual fund-picking point, was fund expense. Over and above everything else, over the long term, fund expense influences bottom line performance. Simply put, choosing lower expense funds can mean big bucks over the long term. As it turns out, the lowest expense funds are typically index funds because, simply, you are not hiring managers to make buy/sell decisions and do a lot of research. In the case of my daughter's 401k, Fidelity's Spartan Funds fit the bill.
What should the reader get out of all of this? First, pay attention to the benefits package when considering a job. Immediate pay may not be the most important consideration. This is lost sometimes on young people, and they literally pay a huge price later. Secondly, if you are in a job and appropriate 401k choices are not offered, talk to Human Resources and see if you can get changes. Very simply, you should be offered at least 3 low-cost index funds for the following market segments: overall stock market, international stocks, U.S. bond market.
Some really good background on all of this is provided by Ron Lieber of the New York Times in "Why 401 (k)'s Should Offer Index Funds." According to Lieber, only 37% of 401ks offer all three of the index funds mentioned. Also, understand that the fund administrators at your company are fiduciaries. ERISA explicitly states that they are legally bound to take into account plan expenses in selecting investment options.
If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.