**The Case:**

You have recently graduated from college, and your job search led you to East Coast Yachts. Since you found the company’s business seaworthy, you accepted a job offer. On your first day, while completing your employment paperwork, Dan Ervin from Finance informs you about the company’s 401(k) plan.

A 401(k) plan is a retirement plan offered by many companies. These plans are tax-deferred savings vehicles, meaning any deposits you make into the plan are deducted from your current pretax income, so no current taxes are paid on the money. For example, if your salary is $50,000 per year and you contribute $3,000 to the 401(k) plan, you will only pay taxes on $47,000 of income. There are also no taxes on any capital gains or income while you are invested in the plan, but taxes are paid when you withdraw money at retirement. As is fairly common, the company also has a 5% match, meaning the company will match your contribution up to 5% of your salary, but you must contribute to receive the match.

The 401(k) plan offers several investment options, most of which are mutual funds. A mutual fund is a portfolio of assets. When you purchase shares in a mutual fund, you are actually purchasing partial ownership of the fund’s assets. The return of the fund is the weighted average of the return of the assets owned by the fund, minus any expenses. The largest expense is typically the management fee, which compensates the fund manager who makes all investment decisions for the fund.

East Coast Yachts uses Bledose Financial Services as its 401(k) plan administrator. The investment options offered for employees are discussed below:

- **Company Stock:** One option in the 401(k) plan is stock in East Coast Yachts. The company is currently privately held. However, when you interviewed with the owner, Ms. Larissa Warren, she informed you the company stock was expected to go public in the next three to four years. Until then, the company stock price is set each year by the board of directors.

- **Bledose S&P 500 Index Fund:** This mutual fund tracks the S&P 500. Stocks in the fund are weighted exactly the same as the S&P 500. This means the fund return is approximately the return on the S&P 500, minus expenses. Since an index fund purchases assets based on the composition of the index it follows, the fund manager is not required to research stocks and make investment decisions, resulting in usually low fund expenses. The Bledose S&P 500 Index Fund charges expenses of 0.15% of assets per year.

- **Bledose Small Cap Fund:** This fund primarily invests in small-capitalization stocks, resulting in more volatile returns. The fund can also invest 10% of its assets in companies based outside the United States. This fund charges 1.70% in expenses.

- **Bledose Large Company Stock Fund:** This fund invests primarily in large-capitalization stocks of companies based in the United States. Managed by Evan Bledose, it has outperformed the market in six of the last eight years. The fund charges 1.50% in expenses.

- **Bledose Bond Fund:** This fund invests in long-term corporate bonds issued by U.S. domiciled companies, restricted to bonds with an investment-grade credit rating. This fund charges 1.40% in expenses.

- **Bledose Money Market Fund:** This fund invests in short-term, high credit quality debt instruments, including Treasury bills. As such, the return on the money market fund is only slightly higher than the return on Treasury bills. Due to the credit quality and short-term nature of the investments, there is a very slight risk of negative return. The fund charges 0.60% in expenses.

**Question:**

Assume you decide to invest at least part of your money in large-capitalization stocks of companies based in the United States. What are the advantages and disadvantages of choosing the Bledose Large Company Stock Fund compared to the Bledose S&P 500 Index Fund? Explain.