401K CIT questions

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tcb1005
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Joined: Wed Dec 23, 2020 8:28 pm

401K CIT questions

Post by tcb1005 »

Hello everyone,

I recently switched jobs and have begun to work for a Fortune 100 company. While selecting my 401k options, it appears unless I want to pay $20 a quarter for a "brokerage view" account with the fund administrator, my only options are various actively managed JP Morgan Target date funds and various CIT funds. I elected to institute the 3 fund portfolio from Mr. Larimore and I am using their CIT's that most replicate the three categories. There is a US large cap equity index fund which has an expense ratio of 0.006% and tracks the Russell 1000 TR, an international equity index fund with and expense ratio of 0.042% and tracks the MSCI ACWI EX US IMI NR, and an actively managed bond fund with an expense ratio of 0.173% that is roughly 40% corporate debt and 60% federal debt.

My questions are these:
Are there any drawbacks to the CIT structure to retirement investors? I really dislike that there is no ticker symbol so I can review the fund's performance on Morningstar.

Also, given the CIT's offered by the fund seem to be sufficient enough to replicate the three fund portfolio and have relatively low expense ratios, there should be no need for me to sign up to the "brokerage view" account correct?

Thank you all for your help!
“People calculate too much and think too little.” Charlie Munger
PersonalFinanceJam
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Joined: Tue Aug 24, 2021 8:32 am

Re: 401K CIT questions

Post by PersonalFinanceJam »

tcb1005 wrote: Wed Jan 26, 2022 6:42 am
My questions are these:
Are there any drawbacks to the CIT structure to retirement investors? I really dislike that there is no ticker symbol so I can review the fund's performance on Morningstar.

Also, given the CIT's offered by the fund seem to be sufficient enough to replicate the three fund portfolio and have relatively low expense ratios, there should be no need for me to sign up to the "brokerage view" account correct?

Thank you all for your help!
I have CITs offered in my 401k. Other than having no ticker and no distributions, they have performed almost identically to any similar mutual fund of the same index. I see no downsides for a retirement investor especially at the low ER. I wouldn’t be opening a brokerage window and charged a fee because of them. If you have an old 401k or traditional IRA with a better bond fund, I might stick to that for bonds for a while. Overall for a 3 fund portfolio person it seems like you have good options.
nolesrule
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Re: 401K CIT questions

Post by nolesrule »

If they are tracking their benchmarks and their benchmarks are something you are okay with in the portfolio, then CITs are fine.

My wife has been with her MegaCorp for 19+ years and they use CITs (no brokerage window available). They've been performing as expected all along.
MrJedi
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Re: 401K CIT questions

Post by MrJedi »

CITs are generally superior because they are less expensive to operate and thus typically less expenses for the investor. They are less regulated with reporting requirements, less distribution requirements, and whatnot. The downside is they are not as easy to track and research as you noticed, but that is how they get expenses down so low.
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JoMoney
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Re: 401K CIT questions

Post by JoMoney »

The drawbacks of a CIT are exactly what you're experiencing, they aren't required to provide the same disclosures and information that the SEC requires for public stocks and mutual funds.
However, that generally allows the CITs to operate at a lower cost, they do have government/regulatory oversight. Since they are trusts, and part of an ERISA retirement plan, there's an argument that could be made that they have even more regulatory oversight with possibly heavier penalties if they are mis-managed by the trustee.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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anon_investor
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Re: 401K CIT questions

Post by anon_investor »

tcb1005 wrote: Wed Jan 26, 2022 6:42 am Hello everyone,

I recently switched jobs and have begun to work for a Fortune 100 company. While selecting my 401k options, it appears unless I want to pay $20 a quarter for a "brokerage view" account with the fund administrator, my only options are various actively managed JP Morgan Target date funds and various CIT funds. I elected to institute the 3 fund portfolio from Mr. Larimore and I am using their CIT's that most replicate the three categories. There is a US large cap equity index fund which has an expense ratio of 0.006% and tracks the Russell 1000 TR, an international equity index fund with and expense ratio of 0.042% and tracks the MSCI ACWI EX US IMI NR, and an actively managed bond fund with an expense ratio of 0.173% that is roughly 40% corporate debt and 60% federal debt.

My questions are these:
Are there any drawbacks to the CIT structure to retirement investors? I really dislike that there is no ticker symbol so I can review the fund's performance on Morningstar.

Also, given the CIT's offered by the fund seem to be sufficient enough to replicate the three fund portfolio and have relatively low expense ratios, there should be no need for me to sign up to the "brokerage view" account correct?

Thank you all for your help!
Does your plan provide morningstar data? My megacorp 401k plan uses CITs and every quarter they release morningstar informational sheets with the CIT's performance. They track their respective indexes well and our CITs are all run by reputable very large fund companies.
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tcb1005
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Re: 401K CIT questions

Post by tcb1005 »

anon_investor wrote: Wed Jan 26, 2022 7:59 am
tcb1005 wrote: Wed Jan 26, 2022 6:42 am Hello everyone,

I recently switched jobs and have begun to work for a Fortune 100 company. While selecting my 401k options, it appears unless I want to pay $20 a quarter for a "brokerage view" account with the fund administrator, my only options are various actively managed JP Morgan Target date funds and various CIT funds. I elected to institute the 3 fund portfolio from Mr. Larimore and I am using their CIT's that most replicate the three categories. There is a US large cap equity index fund which has an expense ratio of 0.006% and tracks the Russell 1000 TR, an international equity index fund with and expense ratio of 0.042% and tracks the MSCI ACWI EX US IMI NR, and an actively managed bond fund with an expense ratio of 0.173% that is roughly 40% corporate debt and 60% federal debt.

My questions are these:
Are there any drawbacks to the CIT structure to retirement investors? I really dislike that there is no ticker symbol so I can review the fund's performance on Morningstar.

Also, given the CIT's offered by the fund seem to be sufficient enough to replicate the three fund portfolio and have relatively low expense ratios, there should be no need for me to sign up to the "brokerage view" account correct?

Thank you all for your help!
Does your plan provide morningstar data? My megacorp 401k plan uses CITs and every quarter they release morningstar informational sheets with the CIT's performance. They track their respective indexes well and our CITs are all run by reputable very large fund companies.
Unfortunately not that I can see. They do provide some information that pops up in a Thompson Reuters screen with information from Lipper, but nothing from Morningstar, and the sheet that pops up has very little information.
“People calculate too much and think too little.” Charlie Munger
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tcb1005
Posts: 28
Joined: Wed Dec 23, 2020 8:28 pm

Re: 401K CIT questions

Post by tcb1005 »

Thank you all for your advice, it appears the CITs should be sufficient for my portfolio.
Thanks!
“People calculate too much and think too little.” Charlie Munger
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anon_investor
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Re: 401K CIT questions

Post by anon_investor »

tcb1005 wrote: Wed Jan 26, 2022 1:15 pm
anon_investor wrote: Wed Jan 26, 2022 7:59 am
tcb1005 wrote: Wed Jan 26, 2022 6:42 am Hello everyone,

I recently switched jobs and have begun to work for a Fortune 100 company. While selecting my 401k options, it appears unless I want to pay $20 a quarter for a "brokerage view" account with the fund administrator, my only options are various actively managed JP Morgan Target date funds and various CIT funds. I elected to institute the 3 fund portfolio from Mr. Larimore and I am using their CIT's that most replicate the three categories. There is a US large cap equity index fund which has an expense ratio of 0.006% and tracks the Russell 1000 TR, an international equity index fund with and expense ratio of 0.042% and tracks the MSCI ACWI EX US IMI NR, and an actively managed bond fund with an expense ratio of 0.173% that is roughly 40% corporate debt and 60% federal debt.

My questions are these:
Are there any drawbacks to the CIT structure to retirement investors? I really dislike that there is no ticker symbol so I can review the fund's performance on Morningstar.

Also, given the CIT's offered by the fund seem to be sufficient enough to replicate the three fund portfolio and have relatively low expense ratios, there should be no need for me to sign up to the "brokerage view" account correct?

Thank you all for your help!
Does your plan provide morningstar data? My megacorp 401k plan uses CITs and every quarter they release morningstar informational sheets with the CIT's performance. They track their respective indexes well and our CITs are all run by reputable very large fund companies.
Unfortunately not that I can see. They do provide some information that pops up in a Thompson Reuters screen with information from Lipper, but nothing from Morningstar, and the sheet that pops up has very little information.
If the CIT's are run by a large fund manager like Blackrock, State Street, Vanguard, etc. there really shouldn't be any concerns.
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