Home
Forums
New Posts
Illini Basketball
Illini Football
Sports Talk
Log in
Register
What's new
Menu
Log in
Register
Install the app
Install
Forums
General
Chat
Trading Stock/Investing
JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an
alternative browser
.
Reply to thread
Message
<blockquote data-quote="DaytonIllini" data-source="post: 964075"><p>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.</p><p></p><p>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.</p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="DaytonIllini, post: 964075"] 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. [/QUOTE]
Verification
Post reply
Forums
General
Chat
Trading Stock/Investing
This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
By continuing to use this site, you are consenting to our use of cookies.
Accept
Learn more…