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401k and Personal Finance

New 401k plan

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No I haven not changed my employer or anything, but my company was acquired by a global 50 company this year, and from next year we will have new 401k plan. Currently my 401k is in Vanguard and I am happy with them so far. One advantage with Vanguard is they have the lowest fees in the industry. If all other things are equal (in the long run, I do believe the performance of most large cap stock funds tend to converge), lower fee means better performance for investors.

nest egg pic

(Picture from Money Magazine)

That being said, I also found some interesting things about my new 401k plan: the new funds categories by the investment regions; and the company stock.

First let me talk about buying company stocks in 401k, I know just a few years ago the guys at Enron, WorldCom were hit by this: they invested large portion of their 401k in their company stocks, and then their companies went under. Basically those people at their retirement age suddenly found they either have to cut their living standard, or pospone their retirement. So the lesson is don’t invest heavily in company stocks in 401k. I think this still holds.

On the other hand, I am also excited about the future of our company and its stock. I believe our company is unique because it is one of the largest engineering company in the world (a global company), with its heritage in innovation. While past performance does not gurantee future success, in last 5 years our company stock appreciated more than 200% vs. S&P (and GE) 50 to 60%.

Taking that into consideration, I will put portion of my 2008 contributions to company stock. Now the question is, how long can I ever get one share from Jan 1, 2008 🙂

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