Bogus 401(k) - Any Advice?

[Munger]

Let's just say the 401(k) program at my place of employment is less than perfect. While it does offer a self-directed option (for a fee), it only allows the purchase of mutual funds (no ETFs, individual stocks, etc). Concerned with inflation, this leaves me in a bit of a pickle.

I have not been able to find any commodities mutual fund options that I found acceptable. Nor have I been able to find any precious metals mutual funds. Does anyone know of any such funds or have any recommendations?

If there are not acceptable commodities funds, what do you think is the next best option? I don't like the way the govt. fudges the numbers, but would something like VIPSX be my next best bet? Right now I am 90% cash, so I do want to get protection before POOM...

Also, I am not really interested in doomer "pull it all out and buy gold bars" advice - I am 20+ years to retirement, don't want the penalties and need the tax break.

[pmmeaney]

Re: Bogus 401(k) - Any Advice?

I have a similar issue with a defined 401k plan at my work - through Fidelity. Basically all of the funds available through this are stock funds. They have a couple that are mildly intriguing - Select Gold and Select Energy. However, in the end both are stock funds. I've basically been in cash with my 401k for the last 18 months - happily so. But in the event of high inflation, this strategy will wipe me out. Would either of these be good hedges against inflation? They're both down quite a bit because of the hit the stock market has taken. The select gold fund is primarily not in dollars - largely canadian stocks. After another stock market leg down, would it be a good idea to buy into these?

[Munger]

Re: Bogus 401(k) - Any Advice?

I have a similar issue with a defined 401k plan at my work - through Fidelity. Basically all of the funds available through this are stock funds. They have a couple that are mildly intriguing - Select Gold and Select Energy. However, in the end both are stock funds. I've basically been in cash with my 401k for the last 18 months - happily so. But in the event of high inflation, this strategy will wipe me out. Would either of these be good hedges against inflation? They're both down quite a bit because of the hit the stock market has taken. The select gold fund is primarily not in dollars - largely canadian stocks. After another stock market leg down, would it be a good idea to buy into these?

Interesting thought. Can't say I love how this fund compares with CEF or GLD over the past 4 years:

[Retired Commish]

Re: Bogus 401(k) - Any Advice?

Your issues with your 401-k options seem similar to ones I experienced within a public retirement system. The choices simply weren't there and my attempts to request more options met with lame explanations of why they couldn't help me. Upon retirement, I rolled over the fund in question into my old IRA where I had the choices I wanted.
Your like/dislike of stock mutual funds is not entirely clear. However, for exposure to a broad array of commodities and some gold-silver exposure, I will point you towards one I use and am quite happy with: PSPFX. If you have the chance to chart this fund, please do so. Graphically you can see it's performance was stellar for several years, prior to the debacle that hit all funds in mid-2008
I happen to believe that future returns are enhanced depending on when one buys and I recently bought some PSPFX with my IRA self-directed funds. Please understand this isn't investment advice but if you like to buy low, I don't think you will get a better chance.

[Munger]

Re: Bogus 401(k) - Any Advice?

Your issues with your 401-k options seem similar to ones I experienced within a public retirement system. The choices simply weren't there and my attempts to request more options met with lame explanations of why they couldn't help me. Upon retirement, I rolled over the fund in question into my old IRA where I had the choices I wanted.
Your like/dislike of stock mutual funds is not entirely clear. However, for exposure to a broad array of commodities and some gold-silver exposure, I will point you towards one I use and am quite happy with: PSPFX. If you have the chance to chart this fund, please do so. Graphically you can see it's performance was stellar for several years, prior to the debacle that hit all funds in mid-2008
I happen to believe that future returns are enhanced depending on when one buys and I recently bought some PSPFX with my IRA self-directed funds. Please understand this isn't investment advice but if you like to buy low, I don't think you will get a better chance.

My issues is, I have all the stock mutual funds I could want. I have looked at the funds that are called "precious metals" or whatnot but they all appear to buy stocks of gold miners etc. This is not really what I am looking for - I have a bit of stock exposure through an all equities index fund. I am looking for non-stock funds that would allow me exposure to commodities/gold/whatever. I haven't found anything good.

Here's the performance of PSPFX compared with gld, cef and vipsx:




Reasonably close performance to USO - though I would prefer a fund that did not invest in the stocks of companies. Thank you for the suggestion.

[ASH]

Re: Bogus 401(k) - Any Advice?

I don't like the way the govt. fudges the numbers, but would something like VIPSX be my next best bet?

They have a couple that are mildly intriguing - Select Gold and Select Energy. After another stock market leg down, would it be a good idea to buy into these?

I agree with your general thinking. Were I faced with a similar set of choices, I would probably buy some combination of an inflation-protected bond fund (like VIPSX or FINPX) and an energy fund (like VGENX or FSENX).

[pmmeaney]

Re: Bogus 401(k) - Any Advice?

Thanks for the advice. This really helps to put things in perspective.

Cheers,

Paul

[bpr]

Re: Bogus 401(k) - Any Advice?

Also, I am not really interested in doomer "pull it all out and buy gold bars" advice - I am 20+ years to retirement, don't want the penalties and need the tax break.

I'd suggest a rollover into a traditional IRA at an online broker that will let you buy stocks, ETFs, and funds. I used Tradeking, but I'm sure any number of brokers (online or brick and mortar) will give you a better selection. You won't pay the taxes or penalties as long as the funds are transferred within the allotted period of time (I think it's 90 days), and you won't be limited by the fund selection offered by your employer. This won't do anything for your future 401(k) contributions, but at least you'll be able to manage your existing holdings yourself.

[CanuckinTX]

Re: Bogus 401(k) - Any Advice?

I have a similar issue with a defined 401k plan at my work - through Fidelity. Basically all of the funds available through this are stock funds. They have a couple that are mildly intriguing - Select Gold and Select Energy. However, in the end both are stock funds. I've basically been in cash with my 401k for the last 18 months - happily so. But in the event of high inflation, this strategy will wipe me out. Would either of these be good hedges against inflation? They're both down quite a bit because of the hit the stock market has taken. The select gold fund is primarily not in dollars - largely canadian stocks. After another stock market leg down, would it be a good idea to buy into these?

If you're with Fidelity ask them about Brokerage Link. We use Fidelity at my company and this option should be available to anyone with a 401k managed by them. You just need to fill out a couple of forms and you can now trade in your 401k account almost as if it's a non-retirement account. Also, there is no fee to use it, just your usual transaction fees for trading stocks, ETF's whatever.

[Retired Commish]

Re: Bogus 401(k) - Any Advice?

OK Charles, one more try...You don't seem to like stocks within the sectors that are opposite the industrials; you don't want to buy physical yourself; third and last option: Have you considered Central Fund of Canada, a closed-end fund that buys only gold and silver and stores in their own vaults. Personally, I'd trust their holdings far and above GLD, SLV and other ETFs which will be the ones to lose bigtime if confiscation ever happens. There has been doubt expressed by some that GLD is heavily into the futures market with some of their professed holdings...
I wish you luck in trying to find something that makes you comfortable. :-)

[charliebrown]

Re: Bogus 401(k) - Any Advice?

I dont think you have this option (roll over to an IRA) unless you leave the company.
If someone wants to correct me on this I am all ears. My only non-stock option in my plan is a stable value fund which yields about 4%. I'm even nervous about this. No one can get you 4% guaranteed. I fear the portfolio has some corporate bonds with an insurance wrapper. If the corps go, and the insurance goes I'm sure i will lose principle. t-bills are not in the choices. I have asked for them and been politely brushed off by those in the "know". Lets forget about adding a PM fund, or a commodities fund. When I mentioned county party risk to the 401K oversight board I had to explain it to them. BTW i work for a fortune 50 company.

[pmmeaney]

Re: Bogus 401(k) - Any Advice?

It was actually quite remarkable the brush off I got from my company's Fidelity rep 2 years ago. I was complaining to them that they had nothing available to hedge against the stock market. He mentioned the select gold fund and I responded that it was basically a stock fund - not a commodities fund. When I said I was going to take all of my money out of the stock funds and put them either into cash or a treasury fund, he said I was nuts and that I would be missing out on the "growth phase" of my investment years. I wonder how many people's growth phase blew up in their faces. Mine didn't.

[K Carlson]

Re: Bogus 401(k) - Any Advice?

I'd suggest a rollover into a traditional IRA at an online broker that will let you buy stocks, ETFs, and funds. I used Tradeking, but I'm sure any number of brokers (online or brick and mortar) will give you a better selection. You won't pay the taxes or penalties as long as the funds are transferred within the allotted period of time (I think it's 90 days), and you won't be limited by the fund selection offered by your employer. This won't do anything for your future 401(k) contributions, but at least you'll be able to manage your existing holdings yourself.

The rollover time period is 60 days, without incurring any serious tax penalties. It might be safer to use the trustee-to-trustee method, which eliminates the potential tax liability. The trustee-to-trustee method also allows the 401-K participant to directly transfer his assets (equities, commodities, bonds etal) to his new plan without the need of selling the assets.

[Retired Commish]

Re: Bogus 401(k) - Any Advice?

PMMEANEY: Glad to hear your holdings survived. "I wonder how many people's growth phase blew up in their faces. Mine didn't." Unfortunately, most 401-k holders have no idea of the risk they take on a daily basis. The reps that they talk to are nothing but high-powered salesmen; 'Experts': just ordinary people from out of town!
I keep the majority of my funds in treasuries but do move small amounts into and out of gold & commodities. My primary focus in saving what I have; not worrying about a return which is what get most people into trouble.

[jimmygu3]

Re: Bogus 401(k) - Any Advice?

OK Charles, one more try...You don't seem to like stocks within the sectors that are opposite the industrials; you don't want to buy physical yourself; third and last option: Have you considered Central Fund of Canada, a closed-end fund that buys only gold and silver and stores in their own vaults. Personally, I'd trust their holdings far and above GLD, SLV and other ETFs which will be the ones to lose bigtime if confiscation ever happens. There has been doubt expressed by some that GLD is heavily into the futures market with some of their professed holdings...
I wish you luck in trying to find something that makes you comfortable. :-)

CEF is considered a stock, not a mutual fund. I can't buy it in my 401k. I have gold mining funds hedged with 2x inverse S&P funds, but I can't say the performance has been stellar. Did great until it didn't any more.

I hold PIMCO CommodityRealReturn Strat (PCRDX) which "invests in commodity-linked derivative instruments backed by a portfolio of inflation-indexed securities and other fixed income instruments." Performance since July '08 has fallen off a cliff as you would imagine, so it could be a good time to buy if you expect commodity inflation.

I also have a lot of Merk Hard Currency (MERKX). "It normally invests in a basket of hard currency denominated investments composed of high quality, short-term money market instruments of countries pursuing sound monetary policy and indirectly in gold." It has held up relatively well, even with the recent dollar strength.

Jimmy