Help with 401K investment selection

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Topic Author
blurryvision
Posts: 132
Joined: Tue May 14, 2013 9:45 pm

Help with 401K investment selection

Post by blurryvision »

Hello, I’m trying to help a good friend of mine with her 401K-investment selection. And I need help myself with this.

She currently invests only in a Roth IRA in the Vanguard Target Date 2045 fund, although she is interested in switching to a simple 3-fund portfolio.

I would like to help her choose investments that mimic the Vanguard Total Stock Market fund, VTSAX in her 401K. She can then reallocate her IRA funds to balance out the percentages with Total International Stock Market (VTIAX) and Total Bond Market (VBTLX).

She sent me her 401K-enrollment kit from Voya Financial and I’m trying to make sense of her investment choices :shock: .

I’ve listed her available fund choices and expense ratios. I could not find the specific fund tickers, so hopefully the name is sufficient. Also I am listing the gross expense ratios - seem like they are pretty high to me. I could email the enrollment kit if someone really wants to see it.

Lifecycle Voya Solution 2045 Portfolio Adviser Class 63.4% US stocks, 29.3% Non US stocks, 3.9% bonds (1.52%)

Large Blend Voya U.S. Stock Index Portfolio - Institutional Class (0.27%)
Large Value AllianzGI NFJ Dividend Value Fund - Institutional Class (0.70%)
Large Growth American Funds The Growth Fund of America - Class R-3 (0.98%)
Large Growth Voya Large Cap Growth Portfolio - Service Class (0.93%)
Mid-Cap Blend Ariel Appreciation Fund - Investor Class (1.13%)
Mid-Cap Growth VY® FMR Diversified Mid Cap Portfolio (0.89%)
Mid-Cap Value VY® JPMorgan Mid Cap Value Portfolio (0.87%)
Small Blend Oppenheimer Main Street Small Cap Fund®/VA (0.81%)
Small Growth Vanguard Variable Insurance Fund - Small Company Grwth Port (0.41%)
Small Value Franklin Small Cap Value VIP Fund - Class 2 (0.88%)
Foreign Large Blend American Funds EuroPacific Growth Fund - Class R-3 (0.70%)
Foreign Small/Mid Growth Wanger International (1.07%)
World Stock American Funds New Perspective Fund - Class R-3 (1.10%)

Thank you for any help possible with sorting out these funds. I just need a nudge in the right direction. My friend is very excited to start enrolling in her first 401K. :happy
User avatar
tyrion
Posts: 1423
Joined: Fri Feb 08, 2008 2:33 pm

Re: Help with 401K investment selection

Post by tyrion »

Based on those choices, I would go with what appears to be a SP500 fund:

Large Blend Voya U.S. Stock Index Portfolio - Institutional Class (0.27%)


You mentioned putting bonds and international in the Roth, but I would check the bond options of the 401k to see if there is anything suitable there. Then use the Roth to fill in International and small cap / mid cap. The wiki has a section on replicating TSM by component.

A lot of it will depend on the amounts contributed to each account type, and whether the Roth is funded monthly or not.
Topic Author
blurryvision
Posts: 132
Joined: Tue May 14, 2013 9:45 pm

Re: Help with 401K investment selection

Post by blurryvision »

The S&P 500 seems like a good option, and definitely one I was considering. The expense ratio is the lowest of all the funds also.

I'll check with my friend but I still think she would like to pick some type of Mid and Small Cap fund from her 401K, for simplicity.

Looking more at the information on this option, the Morningstar Style Box matches the VTSAX type, a Large Blend.

Giant - 51.37% Mkt Cap
Large - 35.71% Mkt Cap
Medium - 12.92% Mkt Cap
Small - 0%
Micro - 0%

The description says:
The fund invests at least 80% of its net assets (plus
borrowings for investment purposes) in equity securities of
companies included in the S&P 500® Index or equity
securities of companies that are representative of the index
(including derivatives). It invests principally in common stock
and employs a "passive management" approach designed to
track the performance of the index, which is denominated by
stocks of large U.S. companies. The fund usually attempts to
replicate the target index by investing all, or substantially all,
of its assets in stocks that make up the index.
Past name(s): ING US Stock Index Port I.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Help with 401K investment selection

Post by retiredjg »

blurryvision wrote:I'll check with my friend but I still think she would like to pick some type of Mid and Small Cap fund from her 401K, for simplicity.
The mid and small cap funds in the list are not index and are not particularly low cost. I would not use them myself.

She could hold Extended Market Index (mid and small caps that complete the 500 index) in her Roth IRA if there is room. In truth, the 500 index is good enough and it tracks the total market index very closely.
Topic Author
blurryvision
Posts: 132
Joined: Tue May 14, 2013 9:45 pm

Re: Help with 401K investment selection

Post by blurryvision »

Thank you so much for your help! The change has been made.
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