401K cash out

[cptacek]

Originally Posted by Broken Arrow

Perhaps the most important factor is the fund manager himself, because in the end, that's what you're really investing (especially if they are fairly active and have high turnover rates on their portfolio).

American Funds has a team of managers for each mutual fund. They effectively split the money between the managers and each does their own thing, so the effect of one person leaving and upsetting the apple cart is lower with this approach.

But, you are right, the more money a mega-fund has, the harder it is for it to make a lot more money. Warren Buffet has complained about this. I'm paraphrasing here, but I think he said that because Berkshire Hathaway is so big, even if they find a GREAT small cap company, they probably won't buy it because even if that company grew 400% it wouldn't move their bottom line that much.

[Broken Arrow]

Hehe, right you are, cptacek. As the article has also pointed out, that's how American has compensated for the size of the funds.

But again, I think it points to the dangers of large funds. Sure, several fund managers can and do handle a single fund, but in practice, this also introduce more complexity and more ways that the fund could end up not performing.

As for Bershire Hathaway, yeah its own size has produced an interesting "dilemma" for Warren Buffet. He doesn't make as many plays as he used to and when he does, he has to "swing big" as he puts it in order to make any noticeable gain. But then, having a large war chest also has allowed him some interesting opportunities, such as buying controlling interest of companies that has an otherwise high cost of entry, giving the "wide moat" that he seeks.

Unless I am mistaken, I think it's also worth noting that Berkshire Hathaway is a holdings company and not an actual investment brokerage. Therefore, he's not actually tied down by a lot of regulations that investment brokerages are, such as percentage limits for diversification. When you buy Berks, you buy the company stock, not any funds that they have available as a product.

[cptacek]

Originally Posted by Broken Arrow

Relevant article.

I think it's a fairly balanced article, but as it has pointed out, size should be signal for concern.

er, sorry. didn't read the article.

[Snave]

What amount could you recoop in 10 years? If your 40K earns 10% a year, that is $108,000 it will become. I didn't hear anything about recooping those lost dollars. While you might not like an 80-10-10 or some combo like that, I have got to believe it is better than tossing aside $108K.