If I already have an index fund in my 401k that tracks the S & P 500 index, should I invest in a similar fund that also tracks it in my Roth IRA?
2006-12-30 13:31:32 · 8 answers · asked by Anonymous in Business & Finance ➔ Investing
You could double your losses in your 401k and your Roth, however S&P Index funds have outperformed almost every other type of fund over the last 20 years, so I don't really think it's a bad investment. I do it, I just make sure to keep my position for the long run and not get worried if the market has a bad day.
2006-12-30 14:02:34 · answer #1 · answered by Modus Operandi 6 · 0⤊ 0⤋
i dont see a problem, what is the difference between one s&p 500 index worth 100k or 2 worth 50k, its the same thing, if he likes that as an investment it is really no different than just having one
common sense,you are right,personally i wouldnt just use the s/p 500 index, but for people who like it,having two isnt any different really
2006-12-30 23:07:30 · answer #2 · answered by swenjj 4 · 0⤊ 0⤋
Wouldn't that be investing twice in one security/index. If the S&P 500 goes down you'll have more red in both funds. don't seem worth it to me
2006-12-30 21:40:13 · answer #3 · answered by desmond_12 2 · 0⤊ 0⤋
great question! the easy answer is yes. but, as your investmet accounts grow in bredth this problem becomes more and more apparent. trust me they will...you'll inherit an ira, you'll roll one over, you'll leave one at employer, you'll open one at another, you'll marry someone with just as many etc. before you know it, you'll have 5 or 10 investment accounts.
it sounds like you've got the right mindset though. investing in indexes that track broad markets. great strategy! however, the s&p shouldn't be the only index you invest in. just as that fund diversifies you across many stocks in one fund, you should also diversify yourself across many ASSET CLASSES. the s&p is composed of mainly large blend stocks (big companies with p/e ratios close to the market average). when you invest in this index alone, you miss out on opportunities in other asset classes like small caps, real estate, emerging markets, etc. you should have something in all of these asset classes. check out www.ifa.com for more info on what allocations you should have in each.
what happens when you have 5 or 10 investment accounts and try to invest in 8 asset classes is you rack up commissions (if using ETFs) or account minimums (when using mutual funds). lets say you're using ETFs. if you try to use the same asset allocation in each account, you rack up huge fees (5 accounts times 8 positions time $10 per trade comes out to $400!) if your account balances are small, this can really eat away at your returns.
the other side of this dilema is to allocate your 401k soley to the s&p, your roth soley to small caps, your wifes ira to emerging markets, etc. the problem with this, is that if you have 100% of your roth soley in a risky asset class (say emerging markets), a big hit to this asset class could turn your $4000 roth contribution into $2000. the issue here is that you can't make up for this loss with cash. once you put your 4k into your roth, you can't make up for any losses you incur through dollar cost averaging like you can in your 401k plan. if this happens in a taxable account, you can throw cash at your losses, and "average down".
sorry, this is probably more info than you were looking for, but i think your question warrants it. to sum up:
1) use index funds - long term, they'll beat anything else out there.
2) depending on your risk tolerence, move some of your assets into other classes (small cap, reits, international stocks, bond funds, etc) check out http://www.ifa.com. their allocations put my portfolio at 19.05% this year (against 14.5% on the S&P) and 17.5% vs 13% last year.
3) be careful of the costs vs account type risk issue i spoke of.
good luck, and happy investing!
2006-12-31 00:14:13 · answer #4 · answered by myersei 3 · 0⤊ 0⤋
No Go with Vanguard Equity Income Fund. Does very well.
2006-12-30 22:08:47 · answer #5 · answered by ? 6 · 0⤊ 1⤋
Learn about "asset allocation". It's the number one most important item to understand for long term investing.
2006-12-30 23:06:31 · answer #6 · answered by Common Sense 7 · 0⤊ 0⤋
should not have 100% in such a fund but ok to have a portion of same fund in both. EWA-Australia. EFA - global PEO-oil IAU-gold
2006-12-31 00:35:57 · answer #7 · answered by vegas_iwish 5 · 0⤊ 0⤋
Vanguard 500 (vfinx) or SPY etf that tracks SP500.
2006-12-31 02:29:45 · answer #8 · answered by Anonymous · 0⤊ 0⤋