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Michael Michaud is the founder of Invest2Success.com (http://www.invest2success.com/) and the Invest2Success Blog (http://invest2success.blogspot.com/). He has been investing and trading in the financial markets since 1989. He founded Invest2Success.com to empower individual institutional... More
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  • Retirement 401(K) Pros And Cons 0 comments
    May 17, 2013 6:45 PM

    Morningstar Investment Research

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    May 17, 2013 - Retirement 401(k) Pros and Cons - by Morningstar Investment Research

    Morningstar assistant site editor Jason Stipp recently sat down with Christine Benz, Morningstar's director of personal finance, to discuss some of the benefits and drawbacks of these common retirement-savings vehicles. Although 401(k)s are becoming the primary option to stow cash away for retirement, they are not all cut from the same cloth. Benz addressed how these plans provide discipline in the retirement-investing process, how workers can take advantage of employer contribution matches, and how investors likely have a wider pool of assets from which to choose versus investing outside a 401(k). However, B enz also talked about the negative sides of 401(k) plans, such as those that have higher fees and fewer investment options than other plans. Watch the entire video here (transcript included).

    Roth IRAs vs. 529s--A College-Savings Smackdown

    Rather than use a 529 college-savings plan to provide for college expenses in the future, I plan to use a Roth IRA and invest the money in a target-date fund based on when my child will enter college. Any problems with this plan?

    Morningstar assistant site editor Adam Zoll said that using a Roth IRA to save for college can be an intriguing idea. One reason is that Roth IRA contributions can be withdrawn tax-free for any purpose. And while you'll typically face taxes and a 10% early-withdrawal penalty if you take out investment earnings from your Roth before age 59 1/2, the 10% penalty usually assessed for early withdrawals from an IRA is waived if funds are used to pay for college tuition, books, fees, and other qualified expenses. In most cases, parents would likely consider using their own Roth IRAs to help pay for college. But should you do it?

    Among the other topics we addressed this week:

    Bond Funds Bring It on Home. With bargains scarce, some core bond managers aren't taking too many chances.

    A Fistful of Downgrades. We lowered the boom on five funds.

    You Paid How Much to Hug the Benchmark? Some actively managed large-cap funds charge investors high fees while failing to differentiate themselves from the S&P 500.

    The Low-Volatility Strategy. Although low-volatility equity strategies are backed by an impressive body of research, U.S. stocks are looking pricey.

    A Raft of Portfolio Manager Changes at Janus. Also, Vanguard rolls out an emerging-markets bond fund, major portfolio manager departures at T. Rowe Price and FPA, Neuberger Berman to launch a China fund, and more.

    Fund Face-Off: Eaton Vance's Floating-Rate Funds. For those willing to ride out additional volatility, Eaton Vance's floating-rate closed-end funds have performed well.

    Extreme Outcomes. Why investors underestimate acute risks and what they can do about it.

    Questions and Answers on Morningstar's Valuation Model. Morningstar StockInvestor editor Matt Coffina examines some common questions on dividends, DCF analysis, long- and short-term investing, and more.

    A Rare Bird: The Tax-Efficient Alternative. Gateway enhances a long-short strategy with tax efficiency.

    A Reality Check on Longevity Risk. Assuming age 95 or older is overdoing it, says planner Michael Kitces.

    PowerShares Launches Fundamentally Weighted, Emerging-Markets Bond ETF. Global X to implement reverse share splits on 6 ETFs, WisdomTree drafts a managed distribution S&P 500 ETF, and Arrow draws up plans for a global high-yield bond fund. Plus, the week's best- and worst-performing ETFs.

    Click Here for a Free Trial of Morningstar Investment Research

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