Broker Check

What Daniel Boone Could Teach Us about 401(k) Brokerage Accounts

| October 26, 2016
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Investing, Retirement Plans, Financial Planning

When I was a wee lad, my grandpa used to greet me by the name, Daniel Boone; the American pioneer who carved pathways to the west from the settlements of Virginia to the unsettled side of the mountains which is now Kentucky.  The stories of Boone are countless, some true and some are works of fiction.  For example, almost every image of the Daniel Boone depicts a raw and savage, brawny man wearing a coonskin hat.  Historians tell us this characterization is narrative dramatization at its best.  The real Daniel Boone was the son of an English Quaker immigrant.  History tells us he was very particular about his grooming and appearance.  He was an avid reader and had a remarkably peaceful disposition.  What is undisputed is Boone’s expertise as a huntsmen and an explorer.  Appropriately, Daniel Boone appears atop most lists of original American explorers.  

My guess is most who read this are presently unaware of the investments that exist outside the core funds of their retirement plan, be it a 401(k), 457, or 403(b) plan.  Uncharted territory, the sheer existence of a brokerage window might seem like something of legend.  Often regarded as dangerous, risky, or even treacherous basic human instinct tells us to steer clear of unfamiliar people, places and things.  Only the bold and daring are confident enough to step out of the realm of the known into the unknown.  Those who explored west discovered the abundance of nature and found the first treasures of the American West. 

We are beyond the unexplored period of brokerage investing.  The trails are now marked, packed-down, and improved.   The opportunities, however, still exist to improve one’s portfolio allocation and returns beyond what can be had in the plain vanilla and limited investment choices granted in the core plan.  For instance, the brokerage-window would surely offer access to an Equity Precious Metals fund or ETF (Exchange Traded Fund).  According to Morningstar.com the Equity Precious Metals category is up over 100% this year.  Or, take an appropriate position in a specialty fund focused on stocks of companies headquartered in India.

So you’re not a DIY (do-it-yourselfer)?  Would having a guide help you navigate into this unfamiliar territory?  The self-directed brokerage might allow your advisor to guide you like Daniel Boone through the process of investing your retirement in ways impossible inside of your 401(k).  Ask nicely and they might read Gulliver’s Travels to you during the evening campfire just as historians have recounted Boone doing for his companions.

Investing in your plan’s brokerage window is not an all-or-nothing decision.  You can try it out with a smaller piece of your retirement account until you’re more comfortable.  Don’t let fear of the unknown keep you from achieving what others are achieving- improved investment returns from an unlimited array of investment choices.     

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