401k is a mess of managed & index funds, seeking help
401k is a mess of managed & index funds, seeking help
I've had this 401k with Vanguard for a few years but when I set it up I had no idea what I was doing. I just followed the advice I got from coworkers and relatives, such as "Windsor II is a great fund", "Stay away from LifeStrategy!", "10% in bonds/20% in international stocks no matter what". I've ended up with a mess of managed funds and index funds and now that I'm a bit older/wiser I want to sort this out into something sane that has aggressive growth potential.
Emergency funds: Yes
Debt: Mortgage 5%
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, 5% State
State of Residence: AL
Age: 30
Desired Asset allocation: 90-100% stocks / 0-10% bonds
Desired International allocation: 10-20% of stocks
401k (broken down into Managed and Index)
(Managed)
5% Vanguard Wellesley Income Fund Investor VWINX 0.25%
5% Vanguard Windsor II Fund Investor VWNFX 0.36%
5% Vanguard Morgan Growth Fund Investor VMRGX 0.39%
5% Vanguard Explorer Fund Investor VEXPX 0.52%
20% Vanguard International Growth Fund Investor VWIGX 0.48%
(Index)
40% Vanguard 500 Index Fund Investor VFINX 0.17%
5% Vanguard Small-Cap Index Fund Investor NAESX 0.24%
5% Vanguard Small-Cap Value Index Fund Investor VISVX 0.24%
10% Vanguard Total Bond Market Index Fund Investor VBMFX 0.20%
Other available funds in this 401k:
Vanguard Prime Money Market Fund Investor Class VMMXX 0.17%
Vanguard Short-Term Investment-Grade Fund Investor VFSTX 0.20%
Vanguard LifeStrategy Income Fund Investor VASIX 0.14%
Vanguard LifeStrategy Conservative Growth Fund Investor VSCGX 0.15%
Vanguard LifeStrategy Moderate Growth Fund Investor VSMGX 0.16%
Vanguard LifeStrategy Growth Fund Investor VASGX 0.17%
There's about 30k total in this account. I don't have an IRA on top of this but plan to start one very soon, want to get this sorted out first though.
I have no problems being in a managed fund if it's worth it, problem is I'm not sure which ones are worth it if any of them or % I should keep. I have no particular attachment to my 10% in bonds either, like I said I was just blindly following advice, I could sleep at night with 100% in stocks for the next 10 years since I'm looking for the most aggressive growth I can get. International % is tricky, since there's only International Growth VWIGX available. I'd also like to know if my small cap % is ok or if it should go up, and advice on the allocation since I've got 5% in each of the small cap funds with one of them being a managed fund VEXPX.
Another thought I had was to keep my Wellesley Fund since it's 60% bonds anyway, and dump my VBMFX. I have no idea if this is a good idea or not.
Any advice would be appreciated and feel free to laugh at my dumb choices (I am)
Emergency funds: Yes
Debt: Mortgage 5%
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, 5% State
State of Residence: AL
Age: 30
Desired Asset allocation: 90-100% stocks / 0-10% bonds
Desired International allocation: 10-20% of stocks
401k (broken down into Managed and Index)
(Managed)
5% Vanguard Wellesley Income Fund Investor VWINX 0.25%
5% Vanguard Windsor II Fund Investor VWNFX 0.36%
5% Vanguard Morgan Growth Fund Investor VMRGX 0.39%
5% Vanguard Explorer Fund Investor VEXPX 0.52%
20% Vanguard International Growth Fund Investor VWIGX 0.48%
(Index)
40% Vanguard 500 Index Fund Investor VFINX 0.17%
5% Vanguard Small-Cap Index Fund Investor NAESX 0.24%
5% Vanguard Small-Cap Value Index Fund Investor VISVX 0.24%
10% Vanguard Total Bond Market Index Fund Investor VBMFX 0.20%
Other available funds in this 401k:
Vanguard Prime Money Market Fund Investor Class VMMXX 0.17%
Vanguard Short-Term Investment-Grade Fund Investor VFSTX 0.20%
Vanguard LifeStrategy Income Fund Investor VASIX 0.14%
Vanguard LifeStrategy Conservative Growth Fund Investor VSCGX 0.15%
Vanguard LifeStrategy Moderate Growth Fund Investor VSMGX 0.16%
Vanguard LifeStrategy Growth Fund Investor VASGX 0.17%
There's about 30k total in this account. I don't have an IRA on top of this but plan to start one very soon, want to get this sorted out first though.
I have no problems being in a managed fund if it's worth it, problem is I'm not sure which ones are worth it if any of them or % I should keep. I have no particular attachment to my 10% in bonds either, like I said I was just blindly following advice, I could sleep at night with 100% in stocks for the next 10 years since I'm looking for the most aggressive growth I can get. International % is tricky, since there's only International Growth VWIGX available. I'd also like to know if my small cap % is ok or if it should go up, and advice on the allocation since I've got 5% in each of the small cap funds with one of them being a managed fund VEXPX.
Another thought I had was to keep my Wellesley Fund since it's 60% bonds anyway, and dump my VBMFX. I have no idea if this is a good idea or not.
Any advice would be appreciated and feel free to laugh at my dumb choices (I am)
Re: 401k is a mess of managed & index funds, seeking help
For $30K and given your age, I would move everything into Vanguard LifeStrategy Growth Fund to simplify.
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- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: 401k is a mess of managed & index funds, seeking help
I suggest an allocation of 80/20 stocks/bonds, and a minimum of at least 20% of stocks in international stocks. Around 30% of stocks in international stocks is fairly typical.
. . . . .
Among the funds you list for your 401k the best choice for you is LifeStrategy Growth, VAGSX, 80/20 stock/bond, with 30% of stocks in international. Just use that.
You could also just use that in the IRA you are starting.
VAGSX uses Vanguard Total International Stock Market Index Fund for its international stock component, which is an improvement over International Growth which is all that's otherwise offered in the 401k.
. . . . .
An alternative approach could be --
401k ($30k total)
Vanguard S&P 500 index fund
Vanguard Small Cap-Value Index Fund
Vanguard Total Bond Market Index Fund
(I suggest small cap value at around 30 - 35% of total domestic stock, no need for the small cap fund too. If you want more on that, just Google "winning with small value stocks" for a good short discussion by Rick Ferri.)
new IRA @ Vanguard ($00, start soon)
Vanguard Total International Stock Market Index Fund
. . . . .
With the index fund choices open to you, I don't think there's a need to use any actively managed fund.
. . . . .
Among the funds you list for your 401k the best choice for you is LifeStrategy Growth, VAGSX, 80/20 stock/bond, with 30% of stocks in international. Just use that.
You could also just use that in the IRA you are starting.
VAGSX uses Vanguard Total International Stock Market Index Fund for its international stock component, which is an improvement over International Growth which is all that's otherwise offered in the 401k.
. . . . .
An alternative approach could be --
401k ($30k total)
Vanguard S&P 500 index fund
Vanguard Small Cap-Value Index Fund
Vanguard Total Bond Market Index Fund
(I suggest small cap value at around 30 - 35% of total domestic stock, no need for the small cap fund too. If you want more on that, just Google "winning with small value stocks" for a good short discussion by Rick Ferri.)
new IRA @ Vanguard ($00, start soon)
Vanguard Total International Stock Market Index Fund
. . . . .
With the index fund choices open to you, I don't think there's a need to use any actively managed fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- Peter Foley
- Posts: 5525
- Joined: Fri Nov 23, 2007 9:34 am
- Location: Lake Wobegon
Re: 401k is a mess of managed & index funds, seeking help
While I agree with the recommendations, you really shouldn't be so hard on yourself. You had a well diversified mix of relatively low cost funds, albeit at the expense of overlap. Ruralavalon's suggestions offer two approaches which are much simpler and lower in cost.
Re: 401k is a mess of managed & index funds, seeking help
You have pretty nice options available in your 401K. If I were in your shoes, I will use the Vanguard 500, Vanguard Small Cap Value and Vanguard Total Bond in 401K - say a 40:40:20 split. This leaves you lacking in International and EMs - so when you start your IRA - you can use the commission-free-ETFs that most places provide to include some International Stock Index (EFA or similar) and EM Index (VWO or similar).
Having said all of that - your focus should on increasing savings rather than tinkering much with investments at this stage. Select a simple AA that you can hold on to - and then forget about your investments except for some rebalancing - and put your primary focus on saving.
Having said all of that - your focus should on increasing savings rather than tinkering much with investments at this stage. Select a simple AA that you can hold on to - and then forget about your investments except for some rebalancing - and put your primary focus on saving.
- Taylor Larimore
- Posts: 32839
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Life Strategy Growth Fund
Starfox:
Welcome to the Bogleheads Forum!
I agree with ieee488 who wrote:
Taylor
Welcome to the Bogleheads Forum!
I agree with ieee488 who wrote:
This is a link to the Life Strategy Growth Fund (VASGX) designed by Vanguard experts: https://personal.vanguard.com/us/funds/ ... IntExt=INTFor $30K and given your age, I would move everything into Vanguard LifeStrategy Growth Fund to simplify.
Best wishes."When there are multiple solutions to a problem, choose the simplest one.” -- John Bogle
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: 401k is a mess of managed & index funds, seeking help
The 401k shouldn't be looked at just by itself. I don't think i see anything in your post that mentions other, taxable, money?
Re: 401k is a mess of managed & index funds, seeking help
Thanks for the advice so far! I have some followup questions:
If I choose Plan A (LifeStrategy) then when I open my IRA what should I choose? The same fund, or a Target Retirement fund, or something else? I do kind of like the Plan B DIY option where I hold my international fund in the IRA, but I need to think on it. On small cap, am I understanding this right: Small-Cap Index and Small-Cap Value Index are redundant, and the Value fund is the better performer?
If I choose Plan A (LifeStrategy) then when I open my IRA what should I choose? The same fund, or a Target Retirement fund, or something else? I do kind of like the Plan B DIY option where I hold my international fund in the IRA, but I need to think on it. On small cap, am I understanding this right: Small-Cap Index and Small-Cap Value Index are redundant, and the Value fund is the better performer?
Didn't list it because I don't have much else, about 4k in a money market savings account as my emergency fund, and almost 3k that I've been saving up to start a Roth IRA with. Spouse has no retirement fund.derosa wrote:The 401k shouldn't be looked at just by itself. I don't think i see anything in your post that mentions other, taxable, money?
- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: 401k is a mess of managed & index funds, seeking help
If you choose LifeStrategy Growth VAGSX in the 401k, then use the very same fund in the IRA too.
Yes small and small value overlap a lot, small cap value will likely be better in theory.
Yes small and small value overlap a lot, small cap value will likely be better in theory.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- Taylor Larimore
- Posts: 32839
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: 401k is a mess of managed & index funds, seeking help
Starfox:If I choose Plan A (LifeStrategy) then when I open my IRA what should I choose?
If you have the $3,000 minimum, simply use the same Life Strategy Fund as ruralavalon suggests. An equally good alternative would be to start a Target Fund with the same stock/bond ratio. The Target Funds minimum is $1,000. Each fund-of-funds has over 10,000 individual securities. I would not clutter your portfolio with more unnecessary funds (your current problem).
Best wishes."The enemy of a good plan is the dream of a perfect plan." -- Jack Bogle
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle