Help with choosing funds for ADP 401k

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Help with choosing funds for ADP 401k

Postby ProfessorPlatypus » Wed May 22, 2013 11:18 am

Some background info: I’m 24, making $50k, I have $25k sitting in my savings/checking accounts, and I want to start investing my money.

My employer unfortunately uses ADP as their 401k provider. I've heard bad things about them, but my company will match up to 4% if I contribute 6%. So my plan is to contribute 6% every year, and have a maxed out Vanguard Roth IRA on the side. Does this sound like a good idea?

I also need help choosing which funds to invest my 401k into. Here are my options:

Income
-0.39 SGXX SSgA Cash Series U.S. Government Fund - Class L
-0.46 PTTRX PIMCO Total Return Fund - Class A
-1.07 SGHAX DWS Global High Income Fund - Class S

Growth & Income
(Couldn’t find any info about these. I found a “Class A” version of the first fund at 0.03. I guess I’m just ignorant about the differences between “Classes”)
-SSgA Target Retirement Income Securities Lending Series Fund - Class IX
-SSgA Target Retirement 2010 Securities Lending Series Fund - Class IX
-SSgA Target Retirement 2020 Securities Lending Series Fund - Class IX
-SSgA Target Retirement 2030 Securities Lending Series Fund - Class IX
-SSgA Target Retirement 2040 Securities Lending Series Fund - Class IX
-SSgA Aggressive Strategic Balanced Securities Lending Series Fund - Class VII
-SSgA Conservative Strategic Balanced Securities Lending Series Fund - Class VII
-SSgA Moderate Strategic Balanced Securities Lending Series Fund - Class VII

Growth
-1.00 KDCAX DWS Large Cap Value Fund - Class A
-1.21 NBPBX Neuberger Berman Large Cap Value Fund - Advisor Class
-0.97 FRDPX Franklin Rising Dividends Fund - Class A
-0.18 SVSPX SSgA S&P 500 Index Securities Lending Series Fund - Class IX
-1.31 FAEGX Fidelity Advisor Equity Growth Fund - Class T
-1.13 OPTFX Oppenheimer Capital Appreciation Fund - Class A
-1.23 DEFIX Delafield Fund, Inc
-0.18 SVSPX SSgA S&P MidCap Index Non-Lending Series Fund - Class J
-1.48 OEGAX Oppenheimer Small- & Mid-Cap Growth Fund - Class A

Aggressive Growth
-1.38 NBGAX Neuberger Berman Genesis Fund - Advisor Class
-1.18 PCVAX AllianzGI NFJ Small-Cap Value Fund - Class A
-SSgA Russell Small Cap Index Securities Lending Series Fund - Class VIII (Can’t find info on this one)
-1.23 ALSRX Alger Small Cap Growth Institutional Fund - Class I
-1.01 JIGRX Janus Overseas Fund - Class S
-1.32 TEDIX Franklin Mutual Global Discovery Fund - Class R
-1.36 ODMAX Oppenheimer Developing Markets Fund - Class A

As someone who is brand new to investing, this is somewhat overwhelming. I’m completely ignorant when it comes to choosing funds, so any advice would be extremely helpful. Because I’m young, I don’t mind taking on a decent amount of risk. But I also know that the market has been skyrocketing lately, and it seems like a bad time to get into investing. Let me know your thoughts.
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Re: Help with choosing funds for ADP 401k

Postby BolderBoy » Wed May 22, 2013 12:05 pm

ProfessorPlatypus wrote:I’m 24, making $50k, I have $25k sitting in my savings/checking accounts, and I want to start investing my money.

My employer unfortunately uses ADP as their 401k provider. I've heard bad things about them, but my company will match up to 4% if I contribute 6%. So my plan is to contribute 6% every year, and have a maxed out Vanguard Roth IRA on the side. Does this sound like a good idea?

I also need help choosing which funds to invest my 401k into. Here are my options:

-0.46 PTTRX PIMCO Total Return Fund - Class A

-0.18 SVSPX SSgA S&P 500 Index Securities Lending Series Fund - Class IX

Because I’m young, I don’t mind taking on a decent amount of risk. But I also know that the market has been skyrocketing lately, and it seems like a bad time to get into investing. Let me know your thoughts.

Yes, your investing amount plans sound very good.

You may want to do a bit of reading in the Bogleheads' wiki.

Nutshell - keep 6-12 months of expenses back as cash somewhere. Determine what AA you desire (if you don't mind risk, lotsa equities are okay.) Look at ALL your investments (both retirement and nonretirement) as part of a whole pie.

In your 401k, the only two funds that I would use in my 401k are shown above. The "time" to get into investing is "anytime". You can't foretell the future.

So by example only... Let's say you decide that an 80/20 (stock/bond) split is the AA you want. Best to keep bond funds in retirement accounts, so "fill out that space" with as much of your 20% bond allocation as you can, then add in the stock amount. In your taxable investment account, you'll try to use efficient stock (preferably index) funds. If you need bond funds in your taxable account, consider tax-free bond funds.

HTH to get you pointed in the right direction, welcome to the forum and congratulations on getting started now - I waited until I was 42 and didn't know what I was doing (?) until finding the Bogleheads in 2009.
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Re: Help with choosing funds for ADP 401k

Postby ProfessorPlatypus » Wed May 22, 2013 12:38 pm

Thanks for the amazing welcome! This is fantastic advice.

So if I understand this correctly, I basically want my entire 20%-30% bond allocation to be in my 401k, with my stocks finishing off the 6% contribution as well as making up all of my IRA account. Do you think a Roth IRA is a good choice for me? Or is a traditional IRA a better option? I've heard some disagreement as far as this goes so I'm a bit confused. I guess I need to figure out how much I want to invest overall before I decide the proportions in my 401k.
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Re: Help with choosing funds for ADP 401k

Postby WHL » Wed May 22, 2013 1:32 pm

I'm not an expert, but I concur with Bolder on the two funds to use. For international exposure, use your Roth IRA.

Unless you can gain a tax credit or something by reducing your taxable income, I would contribute to a Roth.

I would also think that you have no need to open a taxable brokerage account. If you want to contribute more, just up your 401k contribution amount. The two funds suggested are decent enough.
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Re: Help with choosing funds for ADP 401k

Postby BolderBoy » Wed May 22, 2013 1:38 pm

WHL wrote:I'm not an expert, but I concur with Bolder on the two funds to use. For international exposure, use your Roth IRA.

Unless you can gain a tax credit or something by reducing your taxable income, I would contribute to a Roth.

I would also think that you have no need to open a taxable brokerage account. If you want to contribute more, just up your 401k contribution amount. The two funds suggested are decent enough.

I mostly agree with WHL. If you will have any taxable investing space, that is where I would put the international exposure (so you can capture and deduct any foreign tax credit.) But that is being pretty picky (and I don't actually do that in my own portfolio...yet, anyway.) :oops:
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Re: Help with choosing funds for ADP 401k

Postby mnvalue » Wed May 22, 2013 1:46 pm

Don't do taxable until you have maxed out the tax-deferred space. It doesn't sound like you can afford the max on everything, so that won't be an issue. If that 50k is gross, then you're in the 15% tax bracket, so I don't see any harm in the Roth IRA (instead of a traditional IRA), and it has some advantages (being able to remove contributions--but not earnings--penalty free in extended emergencies, after 5 years). Figure out how much you can afford to invest in year one, and we can help fine tune the plan.
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Re: Help with choosing funds for ADP 401k

Postby ProfessorPlatypus » Wed May 22, 2013 2:22 pm

Thanks for all the advice so far!

So it sounds like I won't have to worry about a taxable investment account for a while. I have $25,000 sitting in the bank, but I really only need $10,000 in my emergency fund (which I plan on keeping in a high yield checking account. Maybe Schwab.) After taxes and all my expenses, I have $1000 per month to save/invest. If this is the case, should I max out this year's Roth IRA right now, and up the 401k contribution beyond 6%? I could also open a separate 401k with Vanguard if I can cheaper expense ratios.

The plan is coming together!
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Re: Help with choosing funds for ADP 401k

Postby mnvalue » Wed May 22, 2013 6:13 pm

ProfessorPlatypus wrote:I could also open a separate 401k with Vanguard if I can cheaper expense ratios.

You can only do your own 401k if you're self-employed. So as far you have money to invest, you'll do it in this order: fund the 401k up to the match, then the Roth IRA up to the limit, then back to the 401k until the limit, then taxable.
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Re: Help with choosing funds for ADP 401k

Postby ProfessorPlatypus » Thu May 23, 2013 5:52 pm

So here's my current plan. I'm going to invest 10% of my salary, with the 4% match, in my 401k, 60% in stocks and 40% in bonds. I'll max my Roth IRA purely with stocks (including an international fund). So in a year, that will come out to roughly $9700 in stocks and $2800 in bonds. This gives me 77.6% to 22.4%. Is this too much in stocks? What do you guys think?
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Re: Help with choosing funds for ADP 401k

Postby Johm221122 » Thu May 23, 2013 9:58 pm

ProfessorPlatypus wrote:So here's my current plan. I'm going to invest 10% of my salary, with the 4% match, in my 401k, 60% in stocks and 40% in bonds. I'll max my Roth IRA purely with stocks (including an international fund). So in a year, that will come out to roughly $9700 in stocks and $2800 in bonds. This gives me 77.6% to 22.4%. Is this too much in stocks? What do you guys think?

This seems like a good soultion for now, but revisit your traditional vs Roth decision as time goes by.Read this link about Roth and occasionally look at your traditional vs roth decision
viewtopic.php?f=10&t=116698
John
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Re: Help with choosing funds for ADP 401k

Postby Laura » Thu May 23, 2013 10:49 pm

Congratulations on focusing on investing. Since you are early in your investing lifecycle I suggest you use Target retirement funds to allow for broad diversification, easy management, and low costs. You could do something like this:

Vanguard Roth
Target Retirement Fund 2030

401k
SSgA Target Retirement 2030 Securities Lending Series Fund - Class IX

Both of these have 80% in stock and about 20% in bonds which is a good place to start. Both companies will do all the work to maintain the asset allocation. All you need to do is set up your contributions to go into both accounts automatically then sit back and relax. You will have a broadly diversified portfolio that will be very easy for you to manage. If you are interested, you can then study more and decide what you might like to do once your investment amount has grown substantially. If you aren't really interesting in finance, you can stick with the funds for the long term.

This is really sophisticated investing in a way that is very simple.

Laura
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Re: Help with choosing funds for ADP 401k

Postby ProfessorPlatypus » Tue May 28, 2013 5:41 pm

Johm221122 wrote:This seems like a good soultion for now, but revisit your traditional vs Roth decision as time goes by.Read this link about Roth and occasionally look at your traditional vs roth decision
viewtopic.php?f=10&t=116698
John


Hey John,

Could you go into why a Roth may not be the best idea for me right now? I still haven't pulled the trigger so I have time.
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