Welcome to the Bogleheads Forum!
I am pleased that you found our Bogleheads Guide to Investing
"enlightening." I will try to answer your questions:
First question: given this scenario, is it still to wise to invest in stocks within a 401(k)?
Given that I am 28 years old, I would like to have stocks make up a larger portion of my early portfolio. Given the limited selection of funds in my employers 401(k), this is the allocation I am considering:
Vanguard Inflation-Protected Securities: 5%
Vanguard Total Bond MarketIndex: 20%
Vanguard REIT Index: 10%
Vanguard Total Stock Market Index: 45%
Vanguard European Stock Index: 20%
From what I have researched, most of these funds seem fairly worthwhile. The one I am most unsure about, however, is the Vanguard European Stock Index. It, however, is the only low cost international stock fund that I can choose with this 401(k).
Your primary decision is your stock/bond allocation. You decided on 75% stocks/25% bonds which appears reasonable to me.
The general rule is to fill-up your retirement accounts with taxable bonds. Inasmuch as your portfolio contains only a tax-deferred account (401K) you should use it for stocks (usually a good location).
You have good reason to be "unsure" about using only a European sector fund for international stocks. I have a solution:
Open Roth IRAs for both you and your wife before April 15th
for your 2012 contributions. This will allow you and your wife to immediately invest up to $21,000 ($5,000 each for 2012 and $5,500 each for 2013). These contributions
will grow tax-free and be available at any time and for any reason without tax or penalty. Up to $10,000 of earnings
in each Roth will also be available without tax or penalty for a new home purchase after 5 years from January 1, 2012.
Second question: Does this asset allocation look reasonable and is VEURX a worthwhile component for international diversification?
I like your proposed portfolio very much (except for the limited European stock fund). This can be remedied by using the more diversified Vanguard's Total International Fund in your new Roth(s).
Last question, give my the information that I have briefly outlined, are there any suggestions on a wiser plan for investing?
See above. You might also consider paying-off the high interest student loan if you feel the money will not be necessary for the home downpayment.
In my opinion, you are on the road to investment success.
Congratulations and best wishes.