Of Undiversified 401(k)s and Unworthy Mutual Funds August 9, 2001February 20, 2017 Luis Viera: ‘My question relates to a 401K plan I had with my previous employer, Bank of America. The plan currently has approximately 50% tied up in BAC stock. My dilemma has been when to rollover this account to my current employer’s Vanguard 401K. The primary reason for the delay has been my hope that the performance of BAC stock would improve. Any thoughts on this issue? ☞ ‘You never know, but if I were you, I’d do the rollover. Not that BAC necessarily seems overpriced, or that its 3.5% dividend yield isn’t attractive in today’s environment. But isn’t BAC near its 12- month high, up from 36 to 64? That’s not TOO terrible. And unless you know something the many pros who follow BAC, trying to gauge its fair value, don’t, I would diversify by making the switch. Robert Doucette: ‘I love the Mutual Fund Cost Calculator [accessible by clicking just above the blinking ‘Ask Less’ at upper left] but sometimes I find myself in denial when I see the results. Intellectually I know that it is the very rare fund manager who can consistently beat the Indexes. But, I WANT to believe I have found her (or him). And if she can give me better than market growth, I’m willing to lose a couple of percentage points. Yeah, dumb, but what is logic to a man in love? Well, here are a couple of tools I now use to throw cold water on my delusions. FundAlarm.com has a massive database with practically every Mutual Fund out there, all compared with an appropriate Index fund baseline. If my “dream fund” hasn’t performed better than its baseline index, why am I paying a premium? For those wanting something more graphic, I go to Yahoo! Finance and chart my dream fund along with an index fund. And here is the big surprise: sometimes the two graphs look alike. So, my dream fund is actually an index fund with a high price tag – a stealth index fund.’ ☞ The FundAlarm credo: ‘FundAlarm is a free, non-commercial Website. Our view of the mutual fund industry is slightly off-center. We help you decide when it’s time to sell a fund, instead of when it’s time to buy. The mutual fund industry is full of broken promises, arrogance, greed, hypocrisy — the list goes on. We try to shine a light in the darker corners, and poke holes in balloons that could use some poking.’ Brenda B. (re Tuesday‘s excerpt from the LA Times editorial on Bush’s ‘gigantic giveaway to the energy industry’): ‘I’d just as soon political payoffs went to Enron (now, under Bush) as to the teachers’ unions (formerly, under Clinton) – at least Enron really DOES deliver energy.’ ☞ Every time I see another inner-city high school history teacher step out of her limo, I feel exactly the same way! But $36 billion? Even if you agree with Republican Whip Tom DeLay that we should abolish the Department of Education, and do some of the other things that Clinton and the teachers unions opposed, why would one ‘wrong,’ as you see it, justify another? If anything, your blood should be boiling twice as hot – yet it sounds as if you’re largely indifferent to this.