Like many other employer-sponsored retirement plans in this country, my 401(k) offers me a small basket of funds that I can invest in, most of them being mutual funds with exorbitant expense ratios that absolutely don’t justify their S&P500-comparable performance, or bond funds which I have no interest in since I follow a 100% stock-allocation strategy. The only two adequate options offered are FXSIX, a standard index fund that follows the S&P 500, and FSIVX, an index fund that follows the MSCI EAFE index, which includes large and mid-cap stocks listed in developed markets in Europe, Asia, and Australia. Up until now, I had split my 401(k) allocation with 80% of my capital going into FXSIX, and the remaining 20% into FSIVX for some international exposure.
Back in October, however, a reader by the name of Omar Fuentes commented on my portfolio page, saying that it wouldn’t hurt to ask my 401(k) broker if there was an option to buy and pick individual stocks in order to transcend the otherwise very limited fund selection provided by my employer plan. I thought this was a great idea and jotted it down on my to-do list.
I’m not gonna lie, I’m pretty terrible at actually implementing to-do lists, and it can often take me weeks before I actually get to them (I’m an idiot, I know, lulz). Nevertheless, a few days ago I was going over some of my many unfulfilled to-do lists and came across Mr. Fuentes’ suggestion that I had written down some 2 months ago and decided to actually investigate his suggestion.
After doing a bit of digging, I discovered that Fidelity (my 401(k) broker) actually does offer something called “Brokerage Link”, which is a feature that essentially allows you to open a standard brokerage account and link it to your 401(k), thereby giving you access to pretty much the entirety of the stock/ETF/you-name-it markets. I can’t tell you how excited I am about this, as it allows me to expand my dividend-investing strategy to my retirement account and thus turbo-charge my portfolio.
I really have to give credit to Mr. Fuentes for his suggestion, because I don’t know that I would have thought of looking into this otherwise; I probably would have continued assuming that I was limited to the default funds provided by my plan without giving it second thought. So if you are reading this Mr. Fuentes, thank you!! You’re awesome ;D
With this new information in hand, I promptly opened a “Brokerage Link” account, liquidated my entire positions in FXSIX and FSIVX (thankfully not for a loss, but for a small profit!), and bought the following instead:
- 10 shares of Apple (AAPL)
- 10 shares of Disney (DIS)
- 20 shares of Gilead (GILD)
- 8 shares of Nike (NKE)
- 35 shares of Starbucks (SBUX)
- 15 shares of Visa (V)
Moving forward I will continue to buy stock in dividend-paying companies in my 401(k), just like I do in my taxable account. I have also updated my portfolio page accordingly, and will keep it updated with every new addition to my retirement account. I don’t think I will include dividends from companies in my 401(k) in my monthly dividend logs, however, because I don’t really consider those dividends to be passive income since none of that money will be accessible until I turn like 3 trillion years old — unless I take an early withdrawal and eat the 10% penalty, that is, which I honestly think I will do someday because, well, that’s kind of the point of retiring “early”, isn’t it?
So there you have it! The ZtZ 401(k) has been revamped and upgraded to “vee two point oh”, if you catch my drift. I will say that I highly recommend anyone enrolled in a 401(k) with a seemingly limited number of investment vehicles to do some research and even maybe call their broker to make sure that there isn’t an option to expand their choices. It’s definitely worth it!
Cheers, my dear readers! Hope you all have a fantabulous weekend.
Disclosure: long AAPL, DIS, GILD, NKE, SBUX, V