Work For A Big Company? Read a Review of Your 401(k) Plan

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Do you work for a large government entity or corporation? Are you looking for an independent review of your company’s 401k plan or maybe some investment suggestions? I just ran across, which does just that for a large list of companies, including for example Bank of America, Boeing, ChevronTexaco, Cingular Wireless, Cisco Systems, Citigroup, Costco, Dow Chemical, General Motors, Hewlett Packard, Home Depot, Honeywell, IBM, Microsoft, Nike, and the U.S. Government.

I wouldn’t follow their fund suggestions blindly, but it’s something to consider. They do seem to promote low-cost index funds overall, but also like some actively managed ones as well. This is part of a larger site,, which I’m still perusing. I am intrigued by their suggested portfolios, especially their Vanguard ones since it’s close to my portfolio, but I haven’t entirely figured out their philosophy behind them yet.

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  1. John Wilks says

    My work offers citistreet 401(k). I really like the internet interface. And with every change I do, I get a letter in the mail confirming it.

    However, I wish they offered sample portfolios.

  2. Generally they recommend the managed funds when there aren’t any index funds. I used to listen to his radio show everyday here also
    Paul Merriman does have a lot of great articles on his web site. He has a 500 year estate plan, which I enjoyed the article. Here’s a link if you want to find alternatives to load funds.
    I watched his DVD, which was actually pretty good.

    He actually prefer DFA over vanguard, of course for obvious reasons as if you go through him, which you need an advisor to get into DFA funds he’ll get a percentage. If your not familiar with DFA, the argument is that their index funds aren’t like regular index funds, so they generally do perform better. DFA also does offer more index funds than vanguard. Even though some of the funds that DFA offer are coming to vanguard, such as midcap value is going to be offered very soon.

    One of the big pushes I see is for those who are slice and dice investors (large, large value, small, small value), you don’t have these index options with vanguard when you are talking about international. With DFA you have these funds.

    Paul Merriman actually will write you back if you have a question about something and sometimes he posts them here

  3. The reason behind Vanguard is they usually place very well in rankings and I think they have low expense ratios too. A couple other books I have read have spoken highly of Vanguard’s family of funds.

  4. It’s interesting because they also do some market timing – in one example using the 100-day moving average. This is very similar to the market timing proposed by Stein and DeMuth in ‘Yes, You Can Time The Market!’

  5. I actually started reading one of Paul Merriman’s book, but it was a very very old book and at one time he was a believer of market timing. If you listen to his shows he thinks that you can time the market and be correct maybe 55% of the time (I’m not sure the exact figure he uses), but it seems he was more of a market timer years ago and now has changed this theory. When you listen to any of his shows all he talks about is being a buy and hold investors. He mentions timing the market, but he feels the vast majority of investors are better off with buy and hold strategy.
    Take everything with a grain of salt. He also doesn’t care for REIT much and second he pushes 50/50 international and domestic. I like international and I like REIT as well, but I do believe the equity portion being 50% international is a little too high. Bogle on the other hand always mentions you should not have anymore than 20%. Actually you can hear an interview with bogle and merriman on TSM versus slicing and dicing. As I’m sure you’re aware bogle does not belive in slicing and dicing and says that value is time specific and that French’s research was only time specific. FF though published new data showing that starting from 1926 to I believe 2003 that value outperformed growth and they even published that value has done better historically than growth in almost all developed and emerging countries. Italy is one country that growth has done much better historically than value has. Regardless of any research it seems that Bogle is sticking with TSM instead of slicing and dicing and he’s sticking to there’s nothing wrong with no international and at most 20%. I’m probably getting off the subject though
    I do like Paul Merriman’s international AA more than a lot of other portfolios. With the typical 60% equity and 40% fixed-income I prefer seeing 30% domestic, 20% international and 10% REIT, but it’s just my own opinion. Schultheis for instance puts 40% to domestic and splits 10% to REIT and 10% to international. I personally feel that he should shift more towards international as with a 60% AA having 40% domestic is a little high in my eyes. Merriman I think should allocate 10% to REIT, but the risk and return of REIT is similar to S&P500, thus he feels that if you take away a percentage of his portfolio and add REIT that you’ll lower your risk, but at the sametime lower your return. I personally feel the AA should be shifted from International to include 10% REIT. Of course you’ll get 100% opinions though.

    Jonathan: have you read Yes, You Can Time The Market!? I’ve never read the book, even though it sounds intresting. I was under the impression that they really don’t time the market, but they look at P/E ratios in which they believe if you buy when the P/E ratio is low that in the long run you’ll be better off. I’m not certain about this, but thought this is what I read the book is mostly about. Therefore, I could have sworn I heard others argue that the book really isn’t about timing the market as in signs

  6. Jonathan,

    As a consistent reader of your blog and a fan of, I would recommend Merriman Capital resources. They also have a weekly podcast that is very informative with guests like John Bogle. They are very much buy and hold oriented, but they offer a market timing strategy to limit losses for individuals who are a little hesitant to stick through market down turns. They dont profess to be able to beat the market. In fact, (the parent company of fundadvice and 401khelp) has a short webcast video explaining their reason behind market timing.

  7. As an employee of Citigroup, I’d agree with most of the information presented on 401khelp with one exception.

    They do not recommend the Legg Mason Partners Aggressive Growth (SAGYX) fund. It is a 5 star rated Morningstar fund and consistently beats most of its peers and the S&P 500. Why this fund was left out of the Aggressive portfolio is beyond me.

  8. Joel:
    There’s no proof that 5 stars are any better than 4 stars from morning star, there’s a lot of data that actually indicates that 4 stars actually have historically beat 5 stars.

    I can try to at least justify why it’s not included. First Paul Merriman believes in index funds over managed funds, therefore if he was going to select a fund he would select an index fund first. Second you are comparing large cap growth SAGYX to the S&P500, which is large cap blend, therefore you are comparing two different asset classes. Even though they are both large cap, one is a blend between growth and value and the other is considered growth.

    To explain the theory in Paul Merriman’s portfolio is that he believes in slicing and dicing with a tilt to value. State Street Russell 2000 Index for example is small blend also (not small growth or small value), thus his domestic portfolio is based on: (large cap, large cap value, small cap, small cap value), therefore the manged fund would not belong in his portfolio. If he replaced the S&P500 with SAGYX then there would be less of a tilt towards value as he believes investors are compenstated for taking the added risk.

    Check out kiplinger’s September issue on page 44 and as we know short-term performance means nothing, but if you look at the best performance of large company blend, you’ll see not one index for best 1 year return, not one for 3 years, 5 years or 10 years. But after 20 years vanguard’s S&P500 index is the 6th best performing fund there is. It’s just more data to show that managers really don’t add value and the chances of you picking a managed fund that outperforms its’ equivalanet index fund is a hard task to do. The ones that do generally aren’t being measured against it’s correct asset class. I’m referring to a manged fund that is a mix of REIT and small cap value is shown against the S&P500 index just isn’t a fair comparison

  9. Value beats growth. Just think about it. As soon as you figure out that something is “growth”, the growth is “priced in” and bought up.

    As my favorite money guy, W Bernstein, said in

    …just as you learned in Econ 101, stock returns lead economic growth and not the other way around. In even simpler terms, just as growth stocks have lower returns than value stocks, so do growth nations have lower returns than value nations?and they similarly get overbought by the rubes.

    I’m always a little fearful of spreading knowledge because if the rubes gets marter, where will that leave me? Just look at what happened to Jonathon’s Citibank card… 😉

  10. I really need to make a change in my 401k investments. I am considering their suggestions…I’m thinking moderate for the comcast 401k plan.

    I’m 32. I put in 10%, they match 100% of 6%. So, I get 16% of my annual into the pot. Not too bad. Along with the $8K a year for the wife and my annual limit, I hope to retire mid to late 50s. 401k and roths are (at the moment) our sole source of retirement income.

    Any advice on their review of my plan? At this time, I was thinking about just putting future contributions into their suggestions and keeping my current totals as they stand.

    Current totals:

    (About $60K in my 401K today).
    58% Ariel Fund
    22% Fid Blue Chip Growth
    13% Fid Diversified Intl
    7% Misc.

    ^^ Its all stocks….pretty risky – not very wise, I’d like to go more moderate but I can take some risk.

    As for the Roth(s).

    I am currently new in the plan (also with fidellity). We’ve got the following.

    ($8,000 initial contribution for 2005)

    50% Fidelity Canada
    50% Fidelity Capital Appreciation

    We will be putting in $8K for each of the 06 & 07 years around January 2007.

    Any advice is welcome! Thanks!

  11. the-insider says

    I just read this entry today and wanted to thank you for posting this – this is awesome!! Keep up the good work and let me know if I can help…

  12. I read in an errata for Paul’s book that if you don’t have International Small Cap and Small Cap Value, that you could reduce your International exposure to 30% (down from 50%). I used MorningStar’s X-Ray to analyze Vanguards closed International Explorer (VINEX) and the other Buy-and-Hold suggestion at and came up with the following alternative: 25% ARTKX, 12.5% PRIDX, 37.5% PISRX & 25% WTIFX. It’s not quite like VINEX but it’s very comparable to the other suggested funds for International Mid/Small Cap & Mid/Small Cap Value. One could simplify it by using 1/3 ARTKX & 2/3 PISRX if needed. With this added piece of the puzzle I feel comfortable doing a 60/40 split between US & Internationl for the equity portion of my portfolio. Paul’s FundAdvice website has been a blessing in disguise. It’s opened my eyes to a methodology for rebalancing my portfolio. I was going to consider market timing, but after reading Burton Malkiels book “A Random Walk Down Wall Street”, I decided against it. Buy-and-Hold is where I am the most comfortable.

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