unreal example of friend's 401k, Vanguard index funds with low exp ratios

[cabronjames]

I was advising a friend on her investing plan.

Her 401k fund list is limited.  As typical for 401ks, from a PP perspective, there is no gold or 30 yr T-Bond options.

However, there are several Vanguard index funds (VIIIX, etc), with unreal low exp ratios, even lower than that of a non-work Vanguard custodian account

Fund Ticker, Fund ER, Brother ETF Ticker, ETF ER, Asset Type, Index Name
VIIIX, .02%, VOO, .06%, Stock US Large Blend, S&P 500
VTPSX, .12%, VXUS, .20%, Stock ex-US Large Blend, MSCI All Country World ex USA Investable Market
VBTIX, .07%, BND, .11%, Bond US Intermediate Term High Credit Quality, Barclays Capital U.S. Aggregate Float Adjusted

Has anyone ever seen expense ratios this low, period?  Even crazier, this low in a work 401k account?

[Tortoise]

Has anyone ever seen expense ratios this low, period?  Even crazier, this low in a work 401k account?

I have now

It makes sense, given the huge minimum investment amounts for those institutional funds. It's kind of like getting a really good deal when you buy in bulk.

[stone]

Clive, "db x-trackers STOXX has had a ZERO percent rate since 2009"

That etf uses derivatives rather than physical replication so the expense ratio idea seems a bit mute to me. Imagine you had a 10x leveraged permanent portfolio and then marketed four synthetic etfs, one tracking gold, one tracking stocks, one LTT and one STT . Isn't that in effect what db x-trackers and its counter parties do? They are "too big to fail" and so hope that whenever the wheels come off they will get bailed out.
The ishares etfs, that use security lending to lend out 50% of the holdings, are getting close to doing the same thing with a physical replicating etf.

[MediumTex]

401(k) plans are part of my professional practice area.

You will find great differences among plans in expense ratios for plan investment options.  Some are run very well, while others are getting screwed and often don't even know it.

The Department of Labor has issued several batches of regulations recently providing for significantly expanded disclosure of plan fees generally, and investment expenses specifically. 

401(k) plan investment fund expenses should be going down across the board from here forward.

[mandynshane]

MediumTex-  my wife has a 401k also no gold or 30 year treasury right now I have her in pimco funds because they seem to know what they are doing but they are expensive-  what kind of allocation would you recommend in a traditional 401k plan -  mostly she is in symbol paalx

[MediumTex]

MediumTex-  my wife has a 401k also no gold or 30 year treasury right now I have her in pimco funds because they seem to know what they are doing but they are expensive-  what kind of allocation would you recommend in a traditional 401k plan -  mostly she is in symbol paalx

Normally, the only trule appropriate PP asset offered in 401(k) plans is an equity index fund.

Next in line after an equity index fund would be the so-called "stable value" funds, which are similar to t-bills in their stability, though obviously not anywhere near as safe as t-bills in a crisis.

Bond funds in 401(k) plans are normally useless for PP purposes.  No way to fix that one.

Obviously, there won't be any gold offering in a 401(k) plan lineup.

Many 401(k) plans offer PRPFX as an investment option, and some fortunate 401(k) participants have this as an option.

Some 401(k) plans offer a "brokerage window" which basically gives you the range of choices available to IRA owners inside a 401(k) plan.  My employer's 401(k) plan offers a brokerage window and it's great.  I can set up my PP without having to cut any corners.  One thing about brokerage windows is they are normally not advertised much by the plan sponsor.  You will normally see only passing mention of them in plan materials (plan sponsors don't want amateur investors going out in the market and losing all their money on ill-timed stock bets).

I hope that is helpful.

[mandynshane]

Her 401k is with John Hancock it doesn't look like they offer a brokerage window they are terrible it seems.  what is your thought on paalx?

[MediumTex]

Her 401k is with John Hancock it doesn't look like they offer a brokerage window they are terrible it seems.  what is your thought on paalx?

I don't think a fund like that would have any role in a PP.

[mandynshane]

no not for a pp -  I'm just saying she cant have a pp because her 401k doesn't offer prpfx  or the proper allocations for hbpp so im trying to figure out what to put her in with the options she has.

[mandynshane]

i totally wish they offered prpfx but they dont.... but paalx has done ok

[MediumTex]

no not for a pp -   I'm just saying she cant have a pp because her 401k doesn't offer prpfx  or the proper allocations for hbpp so im trying to figure out what to put her in with the options she has.

It looks like an okay fund.  Sort of like Vanguard Wellesley or Wellington.

[AdamA]

Her 401k is with John Hancock it doesn't look like they offer a brokerage window they are terrible it seems.

If her options are really that limited, you might consider a more traditional "lazy" portfolio.

I would do a 50/50% broad stock market/broad bond market split, and rebalance once a year. 

The main problem with a plan like this is that it offers very limited inflation protection, so you might have your wife buy some gold coins too.