Should I put 100% of 401(k) in VINIX?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
dct1970
Posts: 13
Joined: Fri Mar 13, 2015 2:54 pm

Should I put 100% of 401(k) in VINIX?

Post by dct1970 » Fri Mar 13, 2015 2:58 pm

I would like Boglehead advice on my overall portfolio. I'm 45 years old so I have 17-20 more years to work and invest.

My current portfolio is as follows:
* 401(k) = ~ $400K
* Variable Annuity = ~ $105K
* Former Job Pension = ~ $55K
* Vanguard Roth IRA = ~ $40K

------------------------------------------------------------
My 401(k) balance is approximately $400K distributed as follows:
Symbl [Name] %FC / %CA
FBALX [FIDELITY BALANCED] 10.00 / 10.22
ARTMX [ARTISAN MID CAP INV] 15.00 / 16.38
DRGTX [ALLIANZGI TECHNOLOGY INSTL] 20.00 / 21.35
CMSCX [COLUMBIA SMALL CAP GROWTH I-Z] 15.00 / 13.35
AVISX [AMERICAN FUNDS INV CO OF AMER-A] ----- / 10.04 Class A w/ a Load!!
MLAIX [MAINSTAY LARGE CAP GROWTH-I] 20.00 / 12.26
AEPGX [AMERICAN FUNDS EUROPACIFIC-A] 20.00 / 16.40 Class A w/ a Load!!

Where %FC column above is "% of future contributions" and %CA is "% of current assests"

The weighted overall ER of the above portfolio is 0.96%

Thankfully, I do have VINIX [VANGUARD INSTITUTIONAL INDEX] available to me in the 401(k) with an ER of 0.04%.

----------------------------------------------------------
Former Job Pension is being rolled over to a new Vanguard Traditional IRA into Vanguard Target Retirement 2035 Fund (VTTHX) in May 2015. I do not plan on making any other contributions to this fund.

----------------------------------------------------------
Variable Anniuty matures in August 2015 and I will be moving it to the new Vanguard Traditional IRA noted above

---------------------------------------------------------------------
Vanguard Roth IRA is 100% in VTSAX and I contribute the maximum of $5,500/year.

---------------------------------------------------------------------
Some questions are:
* Should I move all of the 401(k) into VINIX or should I keep some of FBALX and AEPGX or others?
* If I go "all in" with VINIX in the 401(k), how should I alter the others for international exposure [VTIAX??] and other things [bonds?]?

Thanks for your advice!

CoAndy
Posts: 460
Joined: Thu Jun 06, 2013 4:45 pm

Re: Should I put 100% of 401(k) in VINIX?

Post by CoAndy » Fri Mar 13, 2015 5:02 pm

I am a big fan of that fund. I think as long as you maintain your desired AA spread over your portfolio then go ahead and load up on VINIX. What do you see as your preferred AA?

dct1970
Posts: 13
Joined: Fri Mar 13, 2015 2:54 pm

Re: Should I put 100% of 401(k) in VINIX?

Post by dct1970 » Fri Mar 13, 2015 8:58 pm

CoAndy wrote:I am a big fan of that fund. I think as long as you maintain your desired AA spread over your portfolio then go ahead and load up on VINIX. What do you see as your preferred AA?


Forgive my ignorance but what is "AA"? Asset allocation? I've been pretty much all stock funds all the time. A bit of "balanced funds" along the way but no bonds and no "cash".

I guess that is really part of my question also: what should my AA be with 17-20 years left to invest? Should I try to mimic Vanguard Target Retirement 2035 Fund (VTTHX) with my entire portfolio? But if I'm going to do that, should I put everthing ouside the 401(k) into VTTHX...and put everthing in the 401(k) into VINIX?

Of, if I go all VINIX in the 40(k), would i put everthing outside the 401(k) into international and bonds [roughly mimicing VTTHX]? Doing that would still heavily weight me toward VINIX since the 401(k) is, and always will be, much larger than everything else. But I'm OK with that because that's what I've always done anyway.

Thanks for your feedback.

Lafder
Posts: 3553
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Should I put 100% of 401(k) in VINIX?

Post by Lafder » Fri Mar 13, 2015 9:34 pm

dct1970,

Here is a better answer than I can give on what is AA.

http://www.bogleheads.org/wiki/Asset_allocation

Welcome!
lafder

User avatar
Kevin M
Posts: 8866
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Should I put 100% of 401(k) in VINIX?

Post by Kevin M » Sat Mar 14, 2015 12:59 am

If you put the $400K in VINIX and the $200K into fixed income (bind funds, CDs, or a combination), then you will be 2/3 stock and 1/3 fixed, which may be a reasonable asset allocation for you. We don't have enough information to suggest an appropriate stock/bond allocation, but if you use "age in bonds" as a starting point, that would be 55/45, so 55% in stocks. With about 67% in stocks, you would be somewhat higher than that, but some people use 110 - age in stocks, so you would be close to this.

I personally would like to include international stocks, but many, including John Bogle and Warren Buffet, are perfectly happy owning only US stocks, so you would be in good company.

Do you by any chance have a stable value fund in your 401k? What bond funds are available? I ask because if you had a not-too-bad fixed income alternative in your 401k, you could put some of the fixed income into that, and pick up some international stock fund in one of your other accounts.

I definitely would use VINIX in preference to any of the other stock funds you list.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

dct1970
Posts: 13
Joined: Fri Mar 13, 2015 2:54 pm

Re: Should I put 100% of 401(k) in VINIX?

Post by dct1970 » Sat Mar 14, 2015 2:20 pm

Kevin M wrote:I personally would like to include international stocks, but many, including John Bogle and Warren Buffet, are perfectly happy owning only US stocks, so you would be in good company.
Kevin


Agreed. I've usually had a fair amount in international. I currently have 20% in AEPGX in my 401(k). So I'll want to include some international.

Kevin M wrote:Do you by any chance have a stable value fund in your 401k? What bond funds are available? I ask because if you had a not-too-bad fixed income alternative in your 401k, you could put some of the fixed income into that, and pick up some international stock fund in one of your other accounts.
Kevin


My 401(k) "cash" option is WELLS FARGO STABLE RETURN C. I can't find that in Morningstar but my plan's document states the ER is 0.51% as of 01/31/15.

The bond option is PIMCO Total Return Admin [PTRAX] with an ER of 0.71%.

Those fees seem high for funds that will, by definition, have low returns. Should I skip them in the 401(k) and get my bond and cash from Vanguard in one of my IRA accounts?

I think we are getting close to an overall plan.

Thanks!

User avatar
Kevin M
Posts: 8866
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Should I put 100% of 401(k) in VINIX?

Post by Kevin M » Sat Mar 14, 2015 8:45 pm

dct1970 wrote:My 401(k) "cash" option is WELLS FARGO STABLE RETURN C. I can't find that in Morningstar but my plan's document states the ER is 0.51% as of 01/31/15.

I ignore ERs for stable value funds. What is the yield? They should either state it directly, or you can look at return for latest quarter and multiply by 4. The yield and return will be net of expenses, and since the yield usually is set for a certain period of time, the ER isn't a concern as it is for a fund that has uncertain return (and for which the ER will be subtracted from whatever the return turns out to be).

With a quick Google, it looks like 2014 return was 1.25% (net of fees). That is not great, but if the rate still is in the same ballpark, it is better than a savings account at 1%. I probably would use it for at least some fixed income, but I tend to avoid much interest-rate risk. A more common Boglehead position is just to accept the risk and go with something like a total bond fund with a yield in the 2% ballpark.

Pimco Total Return also is a pretty popular choice for 401k/403b plans with no low expense bond index funds, but I have no strong opinion on it one way or the other.

So the general approach is to use the least-bad choices in your 401k, and pick up the other asset classes you want in IRA and taxable accounts. I usually look at the funds to see how well they've tracked the index fund I'd rather own over the last five years or so. So if the international stock fund has tracked Vanguard Total International fairly well, I might use it. Ditto for any bond fund and TBM or whatever bond fund you'd rather own.

I'd be just as concerned about large over-performance as well as under-performance, since that means the fund is taking risks that deviate significantly from the index fund I'd rather own, and past performance is not a great indicator of future performance. Some actively managed funds are basically closet index funds, and that's what I'd want if I can't get a real index fund.

Of course you only need to apply this approach to the funds other than VINIX, since that is a great, low-cost index fund.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

dct1970
Posts: 13
Joined: Fri Mar 13, 2015 2:54 pm

Re: Should I put 100% of 401(k) in VINIX?

Post by dct1970 » Sat Mar 21, 2015 8:36 pm

OK, I'm finally back. I took the plunge and moved to 100% in VINIX in my 401(k). I plan to use Target Retirement 2035 Fund (VTTHX) in my new Traditional IRA. And I plan to shift my Roth from VTSAX to VTTHX also...or I may just try to mimic VTTHX in the Roth with Admiral Shares of the same funds in VTTHX.

Thanks for all the feedback!

User avatar
Kevin M
Posts: 8866
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Should I put 100% of 401(k) in VINIX?

Post by Kevin M » Sun Mar 22, 2015 2:38 pm

dct1970 wrote:OK, I'm finally back. I took the plunge and moved to 100% in VINIX in my 401(k). I plan to use Target Retirement 2035 Fund (VTTHX) in my new Traditional IRA. And I plan to shift my Roth from VTSAX to VTTHX also...or I may just try to mimic VTTHX in the Roth with Admiral Shares of the same funds in VTTHX.

Did you arrive at this solution by first determining your overall desired asset allocation? Do you realize that asset allocation this results in?

VTTHX (Vanguard Target Retirement 2035) has about 58% in Vanguard Total Stock Market, of which about 70% is the same as VINIX; they will perform very similarly, and are both categorized as US large-cap blend stocks. So by my calculations this solution achievies this asset allocation:

86.0%: US large-cap blend stocks
8.3%: Total International stocks
5.7%: Bonds

Having almost 94% of portfolio in stocks at age 45 seems quite risky, and your allocation to international stock at about 8% is on the low side relative to Vanguard's recommendation to hold 20%-40% of equity in international stocks (they currently hold 30% of equity in international stocks in the Target Retirement funds, and are in the process of increasing this to 40%).

You asked if you should put everything outside of the 401k into international stocks and bonds, and I basically said yes. There was no discussion about putting a majority of the assets outside of the 401k into large-cap US blend stocks.

So if you want a very risky portfolio that is heavily tilted toward US large-cap blend stocks, then what you have is fine. Normally we start with desired asset allocation, then work toward that by using the best funds in the 401k, and then using funds outside the IRA to fill out the AA. So if you had first stated that you wanted an AA of roughly 85% US large-cap stocks, 10% international stocks, and 5% bonds, and that you wanted to use as few funds as possible, then we could have arrived at your solution as one possibility.

You also have to consider how future contributions will affect the AA. For example, if you are maxing out 401k and IRA contributions, your AA will become riskier and even more skewed toward US large-cap stocks, since the 401k contributions, all going into S&P 500 index, will be much large than the IRA contributions.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

Rayd8tr
Posts: 11
Joined: Fri Aug 11, 2017 3:32 pm

Re: Should I put 100% of 401(k) in VINIX?

Post by Rayd8tr » Sat Aug 12, 2017 11:33 pm

dct1970 wrote:
Sat Mar 21, 2015 8:36 pm
OK, I'm finally back. I took the plunge and moved to 100% in VINIX in my 401(k). I plan to use Target Retirement 2035 Fund (VTTHX) in my new Traditional IRA. And I plan to shift my Roth from VTSAX to VTTHX also...or I may just try to mimic VTTHX in the Roth with Admiral Shares of the same funds in VTTHX.

Thanks for all the feedback!
Sorry to bring this post back from the dead but I'm in a similar situation and also considering putting 100% of my 401k into the VINIX.

Since your last post back in 2015, how has this plan worked out for you?

Thanks

drk
Posts: 95
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Should I put 100% of 401(k) in VINIX?

Post by drk » Sun Aug 13, 2017 1:11 am

Rayd8tr wrote:
Sat Aug 12, 2017 11:33 pm
dct1970 wrote:
Sat Mar 21, 2015 8:36 pm
OK, I'm finally back. I took the plunge and moved to 100% in VINIX in my 401(k). I plan to use Target Retirement 2035 Fund (VTTHX) in my new Traditional IRA. And I plan to shift my Roth from VTSAX to VTTHX also...or I may just try to mimic VTTHX in the Roth with Admiral Shares of the same funds in VTTHX.

Thanks for all the feedback!
Sorry to bring this post back from the dead but I'm in a similar situation and also considering putting 100% of my 401k into the VINIX.

Since your last post back in 2015, how has this plan worked out for you?

Thanks
This is very much a YMMV situation, so it's kind of irrelevant how it worked out for dct1970 (although, assuming that they stuck with it through 2016, they have some good returns). One fund outside of the context of your asset allocation (ideal and actual) is kind of meaningless. If you're looking for advice, you should create a portfolio advice thread.

Post Reply