The Error-Proof Portfolio: Don't Ignore No-Name Brands in Your 401(k)
Collective trusts lack the same disclosures as retail mutual funds, but many feature low costs and top management.
The cafeteria at my college dorm used to periodically serve up what we'd jokingly refer to as "mystery meat," an unappealing entree of indeterminate origin. When the Bolognese sauce on offer at Monday lunch looked suspiciously like Sunday night's chili, the choice was clear: a bowl of Golden Grahams. Again.
Some 401(k) participants may feel like they're navigating a version of that same cafeteria line, especially if they work for a larger employer whose 401(k) lineup features a lot of choices. As I was helping a friend allocate her 401(k) recently, for example, I spied well-known funds like Dodge & Cox Stock (DODGX) and Fidelity Contrafund (FCNTX) alongside no-name options such as "Large Cap Growth Fund" and "Small-Cap Equity Fund."
When confronted with such a lineup, your natural response might be, "Fidelity Contrafund and Dodge & Cox Stock (or T. Rowe Equity Income (PRFDX) or Vanguard Wellington (VWELX)) all the way." After all, 401(k) participants may take great comfort in knowing their retirement assets are in the hands of one of the investment world's best-known names, and many 401(k) fixtures are there because of these funds' popularity and their solid past performance.
Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.