Ok, so I have a close friend and he’s in his 50’s. We were discussing investing in general for the first time today. He doesn’t know much about investing. It turns out his entire 401k or retirement is invested in one fund - MRLOX. He’s not even sure how he ended up in the fund but he’s there.
So I looked it up and researched it a bit out of genuine concern but knowing I will never give advice without also asking him to run it by a fiduciary ... so in my quick analysis it seems like he’s better off in a S&P 500 Index or Total Market Index. It’s not that MRLOX is a terrible fund but it hasn’t beaten the 500 Index consistently. It’s been fine recently.
What would you recommend? A 500 Index or total market index, a target fund (uggh), stay with MRLOX or pay a brokerage a 1% fee to invest for him (not that he would go for that)... Again, any recommendation will be followed with -run it by an investing professional or fiduciary. Just wanted the community’s opinion. Is there a better option for him? Oh and he’s asking for my advice. It’s not unsolicited.
Depending on how long he intends to continue working, its roughly 65/35 allocation could be quite reasonable. So a first question is why consider a 100/0 allocation going forward as he edges toward retirement? (Your aversion to target date funds reinforces the impression that you prefer equity funds.) After that one could get into global vs. domestic.
There's also a question of mechanics. Generally in-service withdrawals of 401(k)s are not allowed until one is 59½; even then only if the plan allows it. So that part of his retirement assets would seem to have limited options until he's nearly 60. It likely could not be turned over to a brokerage to manage. This also means that we can only talk in generalities (types of funds).
I also notice that he's invested in a a fund with a 0.50% 12b-1 fee. That is considered a load and adds up to way more than 5% or so that one might have paid instead with a front end load. (It charges 0.34%/year more than the A shares that are generally available NTF.) This suggests that most or all of his 401(k) investment options come with high fees. Outside of suggesting doing a rollover into cheaper funds as soon as he is able, I don't know what else could be done about this.
1) Since you stated that his investment is held within a 401K what other funds are available to him or is he looking to move out of the 401K?
2) Warren Buffett is on record recommending a S&P 500 index fund for most people and there certainly are a number of options with far less than a 1.4% ER. I'd start there.
I agree with msf. MALOX has a longer decent past performance but started to fall apart beginning in 2014, vs the SP500. I don't know, but have to suspect more faith was placed into or kept in place outside of the U.S. This has not worked so well during the time frame.
Are you able to provide all of the 401k choices available to him and place the tickers here, AND what organization (Fidelity, etc.) is the vendor for the 401k?
Not much can be offered for comment without knowing other choices.
Here's what the prospectus for MRLOX says about C and R shares: B shares got a bad rap, only partly deserved. The extra 0.75%/year in fees before converting had a net effect roughly the same as paying 5.25% up front (A shares). So they didn't hurt investors much more (or less) than "normal" loaded funds. But because they were sold as "putting 100% of your money to work", the pitch was deceptive.
Similarly, C shares let people think they weren't paying loads. A difference is that unlike B shares, these shares (until some fund families recently relented) never converted.
interesting situ your friend has... making me think
I read an article maybe 20 years ago, seems like yesterday... In investors business daily...said all you need is one growth fund and a money market, checking account
Stated you keep adding to it and then when you get fed up with the daily grind you take monthly withdrawals. No reason to over complicate it
Malox seems reasonable diversified
I think if you did that with vwelx Wellington vanguard over the past 30 years you would have done decent
Sometimes I believe we all tinker to much. I had a Harley Sportster back in the early 80's. The saying was, does it run good? Yes, then don't freak with it, just keep riding
Good luck to you and your friend