401(k) question

[EricPhan]

In late June, after discovering itulip, I decided to change my 401(k) allocation to 100% cash. However, I've recently looked at the holdings and was disappointed to see that there were no US treasuries in the cash fund. Here are the holdings:

http://prospectus-express.newriver.c...5878_soi_1.pdf

Would you feel comfortable with these assets given all the stuff we've read about?

Among the 401(k) offerings are an international bond fund (OIBAX - OPPENHEIMER INTL BOND) and an energy fund (ICENX - ICON ENERGY FUND). I was thinking of allocating some of my balance to these for diversification. Would energy stocks hold up in a prolonged stock market downturn? Could foreign bonds be in danger of default?

I'm probably switching jobs in a year and can roll over my balance to an IRA with more options, but for now, I'm trying to make it to that point without unnecessary losses.

Thanks for helping a beginner make sense of all this!

[hoodoo]

Re: 401(k) question

Yeah - the dreaded crappy 401k problem. I've got it too.

One other place to sniff around in the offerings if you want something conservative. If they offered a blended "fund of funds" you might find something suitable. There may still be a smattering of equities in such funds but I was surprised to find that one of the blended funds in my plan had very little exposure to MBS. That stood in stark comparison to the two "safe" money market funds that held between 40-60% of this crap.

Others can probably comment on the other questions you raise.

HooDoo

[dbarberic]

Re: 401(k) question

Yeah... I've got the same problem of limited choices for 401Ks too. Most of my choices are too general to closely focus my investments in what I really would like to invest in (energy, precious metals, natural resources, etc). For both my wife's and my 401K's, I went with 80% American Funds Euro Pacific (international fund), which I figure at least gets me exposure to foreign assets and away from the USD$. The remainder is invested accross other general US stock investment categories (S&P, small cap, large cap, growth, value, etc).

One thing I did do is get rid of all bonds funds. My personal belief is that CPI is very under-reported and the true rate of inflation is much higher. That automatically puts any bond fund off the table as the average returns are way to low to offset the true rate of inflation. As Jim Puplava often says, bonds are "certificats of confiscation" (by the government through inflation).

With my limited options, I figured the above is the best I could do.

[jimmygu3]

Re: 401(k) question

Yeah... I've got the same problem of limited choices for 401Ks too. Most of my choices are too general to closely focus my investments in what I really would like to invest in (energy, precious metals, natural resources, etc). For both my wife's and my 401K's, I went with 80% American Funds Euro Pacific (international fund), which I figure at least gets me exposure to foreign assets and away from the USD$. The remainder is invested accross other general US stock investment categories (S&P, small cap, large cap, growth, value, etc).

One thing I did do is get rid of all bonds funds. My personal belief is that CPI is very under-reported and the true rate of inflation is much higher. That automatically puts any bond fund off the table as the average returns are way to low to offset the true rate of inflation. As Jim Puplava often says, bonds are "certificats of confiscation" (by the government through inflation).

With my limited options, I figured the above is the best I could do.

dbarberic,

I am not an investment advisor, and speak only as a person in a similar situation. FWIW, I would be very hesitant to be so exposed to foreign equities. I have held about a 10-20% position in them over the last 8 years, which has been very profitable, so I understand their allure.

If you are really that limited on your choices, I would suggest some aggressive hedging outside of your plan. For example, you might want to shift a portion of your 401k to the bond fund and then use options to hedge the inflation risk. If you are not comfortable with options, you may want to hold gold ETFs or physical gold and other PMs as an inflation hedge. You could also take aggresive options or equity positions in the sectors you mentioned (energy, natural resources) outside the plan.

If you don't have investment cash available outside your 401k, you could consider taking a loan and use the proceeds for hedging. I did that in '05 to buy gold and silver (which have both doubled). Just be prepared to have liquidity to cover the loan if you change jobs. I have a HELOC that's just there for emergencies.

Just my $.50 ;) Good luck!

Jimmy

[c1ue]

Re: 401(k) question

I've said this before, and I'll say it again - your best bet is to try and get a self directed stock 401K option implemented.

One way is to get a part time position somewhere that has such an option, the other is to write many long and begging letters to your company's 401K management to add the option.

Stocks aren't a panacea, but they are better than mutual funds - especially limited choice mutual funds.

Disclaimer: I hate mutual funds.