Trading Stock/Investing
My company just announced that the 401K plan is now offering a self-directed brokerage account (SDBA) through TD Ameritrade. It sounds almost too good to be true. Buh-bye just 12 options for investments.
Anybody have experience using an SDBA for their 401K? On paper, it sounds just like a tax-deferred brokerage account like an IRA, but with 401K rules.
Anybody have experience using an SDBA for their 401K? On paper, it sounds just like a tax-deferred brokerage account like an IRA, but with 401K rules.
DaytonIllini
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That's what I have except with Schwab. You described it properly. Much lower cost structure though you have nobody to blame but yourself if you invest poorly. I set our plan up. Over a typical career and with max annual contributions it's stunning how much a typical 401k steals from your nest egg.
DaytonIllini
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If any of you traded PCYC when I talked about it in the $88 range, you are up about $36 per share since April. Remember bulls make money but pigs get slaughtered. Earnings after the bell. A bad quarter, which I don't expect, could crush the stock. A good quarter, could also see some selloff as people sell on the news. I'm letting it roll as my position is a really small part of my portfolio. If anyone bet big, you might consider lightening your investment. I am not a qualified investment advisor and give no advice. While my record is strong I have had a few unmitigated disasters here and there.
CardsIllinifan8
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DaytonIllini
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The self-directed option for a 401K allows an employee the latitude to invest in the stocks, bonds, and funds of their choice. Most 401K plans are limited to a modest selection of funds from a single advisor. These funds often carry significant fees (up to 2.5% per year in some cases) and rarely outperform the market as a whole. In a SDBA the advantage is the ability to invest in low-cost ETF's like the VOO or SPY that track the entire S&P 500 (0.05% expense ratio for the VOO as an example) or VTI that track the entire US market (0.05% expense ratio). These obviously match the market pretty precisely and have very low fees allowing you to keep more of your money.
Others like SDBA's because they can hedge their exposure to downside risk. For example they might own SPY and regularly invest say 1% of their assets in long dated puts against the SPY that would rise in value if the market had a correction. That increases the expense ratio of owning SPY but decreases the downside risk, a strategy that I was thinking of implementing when I get closer to retirement age or perhaps in retirement. While I understand the premise, the details are beyond me at this point in life.
SDBA's for 401K's are becoming more popular but most companies don't offer them because the paperwork associated with monitoring each of the accounts can be pretty overwhelming. Pushing for low-expense options that track major market indices to be added to the selection of fund options at your company might be a more reasonable alternative.
You got that right. Our current 401K (with ING, and not to bore everyone too many details) has ONE fund option for non-US markets, and it has under-performed the MSCI EAFE index for 7 consecutive years (and that's not even the most egregious example).
So I'm pretty damned excited about being able to have more choices. Now I can put CMG in my 401K.
In the case of our company, the 401K administrator was afraid of losing the account. They won't make as much money on employees that opt for the SDBA, but I doubt a very significant portion of employees will choose it. It isn't well advertised, and it does require more active involvement.
It never ceases to amaze me how little time many are willing to spend on managing their finances and investments, especially twenty-somethings.
I don't know what your work situation is, but you might want to call your company's benefits hotline to see if they offer the SDBA option for your 401K.
It wasn't mentioned anywhere on our Benefits website, nor on the 401K website (which is not managed by TD Ameritrade, but by ING, who loses money if we choose the SDBA option).
Here's an article that provides a good summary.
Illiniaaron
- Geneseo, IL
Hey Dayton is this picture an indication of how excited you are about the stock in the company or have you been fooling us all this time-you're actually a teenage girl?
DaytonIllini
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Hey Dayton is this picture an indication of how excited you are about the stock in the company or have you been fooling us all this time-you're actually a teenage girl?
Ha. Having a drug that sells that much in one single quarter is pretty amazing. It appears to be one of the true super drugs of our time. An actual cure of a viral disease with a much lower side effect burden. It's almost too good to be true.
http://ir.pharmacyclics.com/index.cfm
Flat in the after hours.
http://giphy.com/gifs/nfl-johnny-manziel-draft-N8YEzQao6FrwY
I changed it for you. I guess I don't know how to do gifs. It was supposed to be johnny football doing the money sign.
Do you think they'll get bought out by one of the major pharmaceutical companies? Why did the stock drop after the earnings report? Increased spending by the company since the quarter went so well? I told a few of my buddies who invest about this when you brought it up. I need to see if they followed through with the tip.
I'd probably trust you over someone who does it for a living. Your family is blessed having such a well rounded individual as their patron. #cannonizedaytonillini
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DaytonIllini
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Thanks zoggle. I remember my victories a lot more than my disasters of which there are a fair number.
I think the drop happens often in smallish stocks after good news is announced. People take profits and that pushes the stock down. Plus it was up a lot lately.
I could see PCYC being bought out potentially. Johnson and Johnson might want them. I think GILD would be a lot to swallow. Their market cap is almost $140B.
http://gph.is/1iM4SD2
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MuckFichigan
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It will slowly drift down until there is another drug in the pipeline for FDA review, an IB changing its recommendation, or until a few weeks before the next earnings. The price action in pharma especially bio pharma is driven by event risk, until then it is considered dead money by many hedge funds and they reallocate capital to other stocks and sectors to chase a return or where there are more actionable trading ideas. The king of investing/trading in pharmas/bio pharma is Stevie Cohen.
They're(gilead) in the process of stage 1 and 2 trials on a few drugs as we speak I believe that have great benefits. One is the current solvadi being combined with another drug that has greater benefits I believe.
MuckFichigan
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Stage 1 or 2 drug trials are too much uncertainty to be investable unless you have a decent risk appetite, however if their current patent portfolio does not expire for some time then that mitigates some of the downside risk. When trials advance to stage 3 is when the stock starts to have a lot of price action as funds start to reassess the stock and set up for the stage 3 trial results and FDA recommendation. PBYI was a complete shock if you believe that the option market prices event movement with decent accuracy, a lot of market makers got smoked that day.
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DaytonIllini
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I think you guys are thinking of "phase 1, 2, 3" as opposed to stage. I agree with what has been said otherwise. Right now Gilead is done with phase 3 trials on a multi drug cocktail that has ridiculous efficacy. Everyone is expecting FDA approval in the near term. There are some concerns. I believe J&J is in phase 3 trial on a competing regimen. Also with Sovaldi in large scale use it's possible that unforeseen side effects or complications could be found.
Often when everyone expects good news, it's baked into the price already. That said it isn't really priced for perfection. A 50% increase over 12 months is possible.
Often when everyone expects good news, it's baked into the price already. That said it isn't really priced for perfection. A 50% increase over 12 months is possible.
danielb927
Orange Krush Class of 2013
- Rochester, MN
Semi-related but I just started reading Flash Boys while I'm on a conference trip this week. Pretty interesting read so far, not a long one either. I'm not very involved in the market or anything but it's really interesting to read about all of the things going on behind what a personal investor sees. Probably more scary than interesting if you have a big position -I just started up a retirement account this past fall so that's not me yet.
Ransom Stoddard
Ordained Dudeist Priest
- Bloomington, IL
If a made-up currency that isn't recognized (yet) by any federal bank in the world is your idea of a good investment, go for it.
I think BitCoin is this generation's Esperanto.
Thanks for the heads up. The tip came from my wife's old h.s. friend whose parents both are Surgeons. She is also a doctor, and it's her little brother who is starting this operation. I imagine he's a brain too. That's why it peaked my interest.
Anyone look into the cell phone company Xiaomo? How about companies that might benefit from using m pesa?
MuckFichigan
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It's an easy way to launder money. On a side note, my cousin runs an IT company in Louisville, he has a server farm on the side that is used for bit coin farming. I asked him why, his response was he an advantage in power costs relative to other farmers due to cost discounts in Kentucky and West Virginia from taxation of coal power.
Do you mean bitcoin mining?
MuckFichigan
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Guest
Yeah, not my thing so my terminology is rudimentary.