Help deciding investment allocation on new 401(k)

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Help deciding investment allocation on new 401(k)

Postby kromix » Fri Dec 28, 2012 10:38 am

Starting 401(k) at work for the first time, waited to save money to buy house before doing so.


Age: 27
Employer Contributes .50 on the $1 up to 6%


I'm going to contribute 6% pre-tax to get the bax employer contribution.

Options:

Investment Name Expense Ratio
Gibraltar Guaranteed Fund **
Core Bond Enhanced Index/PIM Fund 0.22
Corporate Bond/PIM Fund .50
Large Cap Value/LSV Asset Management Fund .72
Dryden S&P 500 Index Fund .07
Large Cap Growth / Jennison Fund .071
Mid Cap Value / Systematic Fund .85
Mid Cap Growth / Westfield Capital Fund .90
Target Small Capitalization Value Fund .71
Small Cap Growth/TimesSquare Fund .96
International Blend / Thornburg Fund .90



How do I allocate?

P.S I like the idea of being a little more on the aggressive side if that matters.
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Re: Help deciding investment allocation on new 401(k)

Postby stan1 » Fri Dec 28, 2012 11:56 am

Congrats on saving for the house! Some questions:
Are you also contributing to a Roth IRA?
Are you married, and if so does your spouse have any investing accounts?

If the answer to both is no, I'd put 100% into the S&P 500 Index (at least for the first year).
None of the small cap funds in your 401K are worthy of your money.

Next, I would open a Roth IRA for some small cap and international exposure. Do this after you can make the financial commitment to get the matching funds in your 401K -- but before you start putting non-matching money in.

Shoot for something like this after the first year of contributions:
401K
55% S&P 500

Roth IRA @ Vanguard
30% Total International Stock Market
15% Small Cap (Extended Market Index, or Small Cap Value)

If you want to add bonds you could use the PIM Enhanced Index fund in your 401K (reduce S&P 500 target from 55% to 45% and add 10% bonds).

Does your employer's 401K offer target retirement funds with reasonable expense ratios? That's a good way to start off.

It will take a little bit of time to get this in shape -- so focus on where you want to be in a year rather than keeping it balanced every pay period or every month when you make a contribution to your 401k or Roth.
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Re: Help deciding investment allocation on new 401(k)

Postby telemark » Fri Dec 28, 2012 12:11 pm

If it were my money I would choose

30% Core Bond Enhanced Index/PIM Fund 0.22
70% Dryden S&P 500 Index Fund .07

No need to get fancy. If your plan had some decently priced funds for small cap and international I'd mix those in too, but it doesn't.
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Re: Help deciding investment allocation on new 401(k)

Postby kromix » Fri Dec 28, 2012 2:22 pm

Yea my goal was to save save save and have a small mortgage, now that it's out of the way, time to do this...


I am married, my spouse does not have investing accounts right now, but she starts work tomorrow and will be doing whatever the max contributions is... Why do you ask, is it because we should have different funds?

If I go with either 100% on SP or the 30% 70% suggestion do I do this for only a year and re-evaluate?

Thanks.
Last edited by kromix on Sat Dec 29, 2012 10:06 am, edited 1 time in total.
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Re: Help deciding investment allocation on new 401(k)

Postby Grt2bOutdoors » Fri Dec 28, 2012 8:57 pm

kromix wrote:Yea my goal was to save save save and have a small mortgage, now that it's out of the way, time to do this...


I am married, my spouse does not have investing accounts right now, but she starts work and will be doing whatever the max contributions is... Why do you ask, is it because we should have different funds?

If I go with either 100% on SP or the 30% 70% suggestion do I do this for only a year and re-evaluate?

Thanks.


You may want to edit your post and not say where such and such is employed. Statistically, how many folks do you know start work tomorrow, hmmm? Sometimes less is more.
"Luck is not a strategy" Asking Portfolio Questions
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Re: Help deciding investment allocation on new 401(k)

Postby kromix » Sat Dec 29, 2012 10:07 am

Grt2bOutdoors wrote:
You may want to edit your post and not say where such and such is employed. Statistically, how many folks do you know start work tomorrow, hmmm? Sometimes less is more.



Done.

Thanks.
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Re: Help deciding investment allocation on new 401(k)

Postby tainted-meat » Sat Dec 29, 2012 10:53 am

I'd put 100% into the S&P Index Fund and let it ride until you want to add bonds when you get older.
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Re: Help deciding investment allocation on new 401(k)

Postby retiredjg » Sat Dec 29, 2012 2:06 pm

kromix, welcome to the forum! The best choices in your 401k have already been mentioned:

    Dryden S&P 500 Index Fund .07
    Core Bond Enhanced Index/PIM Fund 0.22
But you still need to pick up an international fund and some mid/small caps if possible.

However...in order to build the best possible portfolio, your spouse's plan needs to be considered as well. Along with your debts, desired stock to bond ratio, tax bracket, how much you can save, etc.

If you want a more comprehensive answer to your question, you'll need to provide more information. See the link at the bottom of this message for how to do that.
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Re: Help deciding investment allocation on new 401(k)

Postby ruralavalon » Sat Dec 29, 2012 5:32 pm

Welcome to the forum :) .

Don't try to get too complex to start. Your 401k is your only investment so far and your spouse is not yet employed, so I agree with this simple suggestion for your 401k --

30%, Core Bond Enhanced Index/PIM Fund 0.22 (uses Barclays Capital U.S. Aggregate Bond Index)
70%, Dryden S&P 500 Index Fund .07.

Be sure to contribute enough to the 401k to get the full match each year; its free money, never turn down free money.

Keep it simple. You can reevaluate the 70/30 split after a year or two, if you wish.

Before then do some reading. Try one or two books from the General Investing section of this reading list -- http://www.bogleheads.org/readbooks.htm , and some pages from the wiki, like this -- Wiki article link: Asset Allocation ; and Wiki article link: Domestic/International .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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