Is VIGIX diversified enough?

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freelancer
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Is VIGIX diversified enough?

Post by freelancer » Mon Jan 26, 2015 12:23 am

I'm rethinking my 401k allocations. I didn't really know what I was doing when I set it up 4 years ago and the only advice I had was "Keep expense ratios low" and "buy both stock and bond funds". As it turned out, the 401K performance over the last 4 years has been pretty decent (13% annualized). This is the current allocation:

VIGIX (Stocks) 34% (ER 0.08%)
LifePath® Index Retirement Fund (Mostly Bonds) 23% (ER 0.09%)
Pimco Total Return (Bonds) 22% (ER 0.27%)
Artisan Mid Cap fund (Stocks) 22% (ER 0.50%)

Now my target allocation is 70% stocks and 30% bonds. I want to reduce my current bond allocation and also buy something with a lower ER than Artisan mid cap (though that has done quite well with a 20% gain over the last 4 years).

Should I change it to VIGIX 70% and VBTLX 30% ? I already have international exposure in my taxable account.

Taxable is

Vanguard Total Stock 36.4%
Vanguard Total International Stock 15.6%
Vanguard taxfree intermediate bond 8%
House downpayment cash 40%

Thank you.
Last edited by freelancer on Mon Jan 26, 2015 7:25 pm, edited 1 time in total.

z3r0c00l
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Re: Is VIGIX diversified enough?

Post by z3r0c00l » Mon Jan 26, 2015 6:47 am

Top 10 stocks are 25% of the fund. That is not very diversified, but it is certainly a great deal (.08% er) and so I would be happy to hold this and then diversify with more stocks elsewhere, including taxable as possible.

Personally, and this is very much a personal choice, I would make international stock half of my taxable stock holdings. As long as taxable is equal or larger than the 401K, I wouldn't worry too much about vigix. It is always amusing to see the funds that 401K admins select.

rkhusky
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Re: Is VIGIX diversified enough?

Post by rkhusky » Mon Jan 26, 2015 7:44 am

VIGIX is Vanguard Growth Index.

FullYellowJacket
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Re: Is VIGIX diversified enough?

Post by FullYellowJacket » Mon Jan 26, 2015 9:25 am

It looks like this fund is highly concentrated in the technology sector, with almost 8% in Apple alone. This fund as the only domestic holding would be too risky for me; however, since it will be paired with other funds, e.g. TSM and mid-cap, I would say that it is fine. Interestingly, it looks like Large Growth has thoroughly walloped Large Value (VIVIX) these last ten years.

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Re: Is VIGIX diversified enough?

Post by grabiner » Mon Jan 26, 2015 11:26 pm

What are the options in the 401(k)?

Growth Index is not as well diversified as other indexes; it holds only large-cap growth stocks, not small-cap or value. Therefore, if you have Growth Index, you might want to offset it with a value fund, such as Small-Cap Value Index in your IRA if the 401(k) doesn't have a good value option.
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Topic Author
freelancer
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Re: Is VIGIX diversified enough?

Post by freelancer » Tue Jan 27, 2015 12:35 am

These are the 401K options (excluding the high ER funds)

1. Stocks:
Large Cap: VIGIX,VIIIX,VIVIX (all <0.09 ER)
Mid Cap: Artisan Midcap (0.54 ER)
Small Cap: VSGIX

2.Bonds:
Pimco Total Return, VBIPX

I should mention that my taxable is 3 times my 401K. So if I was to do 70% VIGIX and 30% Pimco Total return in my 401K, my total allocation will look like this:

VIGIX 16%
Vanguard total stock 27%
Vanguard international stock 12%
Pimco bond fund 7%
vanguard tax free intermediate bond 6%
House down payment cash 30%

rkhusky
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Re: Is VIGIX diversified enough?

Post by rkhusky » Tue Jan 27, 2015 8:01 am

I would choose VIIIX (S&P 500) over VIGIX (Growth Index).

Do you have an IRA? I would put small/mid cap into an IRA to counter-balance VIIIX.

Topic Author
freelancer
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Re: Is VIGIX diversified enough?

Post by freelancer » Wed Jan 28, 2015 6:46 am

rkhusky wrote:I would choose VIIIX (S&P 500) over VIGIX (Growth Index).

Do you have an IRA? I would put small/mid cap into an IRA to counter-balance VIIIX.
This is good advice. I haven't set up an IRA yet. I'll exchange the Lifepath and Artisan Midcap shares for VIIIX and buy some small cap fund in the IRA. I'll add some mid cap fund to my taxable to balance things out.

What smallcap and midcap funds should I use for this?

rkhusky
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Re: Is VIGIX diversified enough?

Post by rkhusky » Wed Jan 28, 2015 7:57 am

freelancer wrote:
rkhusky wrote:I would choose VIIIX (S&P 500) over VIGIX (Growth Index).

Do you have an IRA? I would put small/mid cap into an IRA to counter-balance VIIIX.
This is good advice. I haven't set up an IRA yet. I'll exchange the Lifepath and Artisan Midcap shares for VIIIX and buy some small cap fund in the IRA. I'll add some mid cap fund to my taxable to balance things out.

What smallcap and midcap funds should I use for this?
If you have your IRA with Vanguard, Extended Market is the completion index for the S&P 500, i.e. 80% S&P 500 + 20% Extended Market = Total Stock Market (US stock market, that is).

As a reminder, the recommended order of funding is:
1) 401K, up to employer match
2) IRA (deductible or Roth)
3) rest of 401K
4) taxable
although 2) and 3) could switch depending on the quality of your 401K offerings and expenses. Some people also like to use HSA's to save for medical expenses, but I'm not sure where they fit in the ordering.

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