This article will help you with your initial assessment of the Self Directed Brokerage Account (SDBA) among your 401k investment options, which may include ETFs or exchange traded funds.
photo © 2010 Keith Ramsey | more info (via: Wylio)
What you need to know about the SDBA is that it expands the investment choices open to you, well beyond the main menu of mutual funds offered by your plan provider. Ideally, it will allow you to use lower costing, better performing ETFs, exchange traded funds. You will need to look at your particular plan to see what new investment options are available.
Some SDBAs open your 401k to the full range of investment options available in an IRA account. While, other SDBAs may limit your choices to yet another, significantly larger menu of mutual funds (over 300). This is sad because it complies with the letter of the law but not the spirit of the intent of the Pension Protection Act of 2006 which sought to expand the choices available to the Plan Participant (you) and address the self-dealing among Plan Providers and the Mutual Fund Industry.
Assuming your plan now opens you up to a broader range of investment options, you need to look for three things.
First, is there a limit to the amount of your plan assets that you may journal over to the SDBA option;
second, are there any fees associated with the account other than transaction fees for the purchase and sale of investment product; and,
third, does your plan provide for the pre-tax payment of independent, third-party, investment advice directly from your plan assets?