I’ve talked a fair amount about Mr. Money Mustache, but one of the things that really hit me when I started reading his blog over ten years ago was the idea of a low-information diet. The internet is one of the greatest inventions of mankind, but it suffers from delivering information almost too quickly.

There’s a lot of information to consume and when you want to focus and grow your wealth you might find yourself researching to find more ways to make your dollars work for you. Just this morning my phone showed me two articles. The first is about how your 401k fees are eating you alive. This is from CBS News MoneyWatch, and it’s not really wrong, but it is the main reason Vanguard is the gold standard of low fee, low cost, broad-based index investing.

Here’s what the article misses. The Rollover, you aren’t supposed to leave your money in the 401k after you leave the employer. They have higher fees and limited fund choices because of the deals your company makes with the vendor that manages the 401k (or 403b or whatever other plan you have). The rollover, however, is free, and it is important to do whenever you end employment with a company in order to move your money somewhere else. Ideally into an IRA. Robinhood sometimes offers bonuses, but Vanguard and Fidelity maintain the lowest expense ratios and usually have no fees at all.

This was surprisingly relevant to the second article that popped up on my phone today. It’s a partially true, clickbait article, titled “Millions of 401(k) Holders Were Forced to Buy SpaceX at $160. They’ve Already Lost More Than $1 Billion“. There’s a lot to cover here, but the short version is that some top 100 index funds absorbed Space X on its IPO immediately, especially the NASDAQ after a special rule change. Meanwhile, the S&P 500 requires a certain level of seasoning that kept it safe from the volatility of SpaceX. This is just plain common sense regarding something that was touted as the largest initial public offering of all time.

Here’s the problem with this article: most people aren’t shoving their entire 401k into top 100 funds. Many are using Target Date Funds and S&P 500 matching funds. Neither of these had that problem, but here’s the real kicker. You are in charge of your 401k. The money rarely auto-invests, and if it does, it usually defaults into a target date fund for you reaching age 60 or 70. You aren’t supposed to elect 401k contributions and then never log in and pick the right things.

The right thing is following your Investment Policy Statement. If you picked 100% QQQ (a NASDAQ 100 Index) and it picked up SpaceX and crashed a large percentage of your portfolio, you probably should have been aware that it was a possibility. No one’s 401k should be auto-buying something so highly concentrated.

The key is and always will be, that for 99% of people in 99% of scenarios a broad-based index fund like VOO or VTI with the lowest fees possible will grow your wealth over time.

Don’t panic, and don’t react to every single news story. Set It, Forget It, and Re-balance It – annually.

~~Miniwing~~
Investor, Stoic, Parent