1st post! Need help picking funds for 401(k) please

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steve187
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1st post! Need help picking funds for 401(k) please

Post by steve187 » Sat Dec 17, 2016 6:12 pm

Hi all! New to the forum, and have a question about picking picking funds for my 401(k). I am 32 years old and currently have $95K in my 401(k). Ever since the inception of the plan I have always used the"aggressive" portfolio. It has done fine so far, however my personal rate of rate for this year was only 4%. That left me somewhat disappointed, so I decided I would try picking some individual funds (with your guy's help). These are the Vanguard funds my plan offers...

Bond-
Vanguard Intermediate Term Bond Index Adm (VBILX)
Vanguard Short Term Index Adm (VBIRX)

Large Cap-
Vanguard Growth Index Adm (VIGAX)
Vanguard Value Index Adm (VVIAX)

Mid Cap-
Vanguard Mid Cap Index Adm (VIMAX)

Small Cap-
Vanguard Explorer Adm (VEXRX)

Specialty-
Vanguard Health Care Adm (VHCIX)

They offer a few other funds as well, I figured I would just stick with Vanguard due to the ultra low expense ratios. My plan is to retire by 55 so i really wasn't planning on including any Bond funds yet, unless you guys (experts) feel i should! From here on out I will try to max out my 401(k) every year. Thank you!

PMM32683
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Re: 1st post! Need help picking funds for 401(k) please

Post by PMM32683 » Sat Dec 17, 2016 6:44 pm

Are there any Total Stock Market options so you don't have to rebalance large, mid, and small cap domestics?

What are your international stock options? Vanguard recently shifted its recommendation from a 30% international stock allocation to 40%.

If you were to choose holding bonds in your 401k then the Vanguard Intermediate Index would be just fine. I wouldn't go higher than a 10% bond allocation given your age.

livesoft
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Re: 1st post! Need help picking funds for 401(k) please

Post by livesoft » Sat Dec 17, 2016 6:48 pm

Despite your idea to stick with Vanguard funds, those don't look to be the kinds of optimal Vanguard funds often recommended by forum members. Plus there are other vendors with funds better than Vanguard, so there is a chance that your 401(k) has some of them.

Do you mind posting ALL the funds with expense ratios less than 0.4% along with their actual expense ratios please?
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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sat Dec 17, 2016 7:06 pm

PMM32683 wrote:Are there any Total Stock Market options so you don't have to rebalance large, mid, and small cap domestics?

No

What are your international stock options? Vanguard recently shifted its recommendation from a 30% international stock allocation to 40%.

The only international option is a Artsian International Fund (ARTIX) Thanks

If you were to choose holding bonds in your 401k then the Vanguard Intermediate Index would be just fine. I wouldn't go higher than a 10% bond allocation given your age.

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sat Dec 17, 2016 7:10 pm

livesoft wrote:Despite your idea to stick with Vanguard funds, those don't look to be the kinds of optimal Vanguard funds often recommended by forum members. Plus there are other vendors with funds better than Vanguard, so there is a chance that your 401(k) has some of them.

Do you mind posting ALL the funds with expense ratios less than 0.4% along with their actual expense ratios please?

Sure i will do some digging and post the other funds. Thanks

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sat Dec 17, 2016 7:29 pm

Here are the other funds my plan offers...

Cash/Stable Value
Federated Capital Preservation Fund. (CAPPR) Exp 0.76%

Conservative Allocation
Columbia Capital Alloc Mod Con. (NLGAX) Exp. 1.05%

International
Artisan International Fund (ARTIX) Exp. 1.17%

Large Cap
Columbia Dividend Opportunity (RSDFX) Exp. 0.67%

Fidelity Advisor Equity Growth (EQPGX) Exp. 0.78%

Oppenheimer Developing Markets Fund A (ODMAX) Exp. 1.30%

T Rowe Price Growth Stock (RRGSX) Exp. 1.17%

Vanguard Growth Index Adm (VIGAX) Exp. 0.08%

Vanguard Value Index Adm (VVIAX) Exp. 0.08%

Mid Cap

Vanguard Mid Cap Index Adm (VIMAX) Exp. 0.08%

Small Cap

Prudential Qma Small Cap Z (TASVX) 0.73%

T Rowe Price New Horizons (PRNHX) 0.79%

Vanguard Explorer Adm (VEXRX) Exp. 0.35%

Specialty

T Rowe Price Real Estate (TRREX) Exp. 0.76%

Vanguard Health Care Adm (VGHAX) Exp. 0.31%

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ruralavalon
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Re: 1st post! Need help picking funds for 401(k) please

Post by ruralavalon » Sat Dec 17, 2016 8:04 pm

For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

PMM32683
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Re: 1st post! Need help picking funds for 401(k) please

Post by PMM32683 » Sat Dec 17, 2016 8:10 pm

ruralavalon wrote:For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
+1 on the two fund selections, however, I think a 90/10 split may be more ideal since he has plenty of time on his side.

livesoft
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Re: 1st post! Need help picking funds for 401(k) please

Post by livesoft » Sat Dec 17, 2016 8:21 pm

ruralavalon wrote:For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
I like those choices, too.

If you want international equities and/or US small-caps, just put them in a Roth IRA.
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ruralavalon
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Re: 1st post! Need help picking funds for 401(k) please

Post by ruralavalon » Sat Dec 17, 2016 8:22 pm

PMM32683 wrote:
ruralavalon wrote:For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
+1 on the two fund selections, however, I think a 90/10 split may be more ideal since he has plenty of time on his side.
About 20 - 25% in bonds is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please also see the wiki articles "Risk tolerance", "Asset allocation", and Bogleheads® investment philosophy, "Never bear too much or too little risk".

"Plenty of time on his side" does not erase the risk of stocks, and stocks are substantially more volatile over long horizons from an investor's perspective. Pastor, Lubos and Stambaugh, Robert F., "Are Stocks Really Less Volatile in the Long Run? (March 22, 2011)". EFA 2009 Bergen Meetings Paper; AFA 2010 Atlanta Meetings Paper.
According to conventional wisdom, annualized volatility of stock returns is lower over long horizons than over short horizons, due to mean reversion induced by return predictability. In contrast, we find that stocks are substantially more volatile over long horizons from an investor's perspective. This perspective recognizes that parameters are uncertain, even with two centuries of data, and that observable predictors imperfectly deliver the conditional expected return. Mean reversion contributes strongly to reducing long-horizon variance, but it is more than offset by various uncertainties faced by the investor, especially uncertainty about the expected return. The same uncertainties reduce desired stock allocations of long-horizon investors contemplating target-date funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sat Dec 17, 2016 8:58 pm

Thanks for all the great advice! I can rebalance my account by transferring money currently invested to different funds within the plan and it also gives me the option to change how new contributions to my account will be invested. Or I can do both. What do you guys recommend? I was leaning towards just changing the new contributions. Is there usually a charge or fee when you rebalance? Thanks again.

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Re: 1st post! Need help picking funds for 401(k) please

Post by pkcrafter » Sat Dec 17, 2016 10:47 pm

steve187 wrote:Thanks for all the great advice! I can rebalance my account by transferring money currently invested to different funds within the plan and it also gives me the option to change how new contributions to my account will be invested. Or I can do both. What do you guys recommend? I was leaning towards just changing the new contributions. Is there usually a charge or fee when you rebalance? Thanks again.
Are you going to transfer all assets in the 401k to the two funds suggested by ruralavalon? Not sure why you need to rebalance. If you are going to keep some other funds, you should post them because the recommendation was based on holding just two funds. You can transfer from current holdings with no charge within the plan.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: 1st post! Need help picking funds for 401(k) please

Post by GordonG » Sun Dec 18, 2016 2:31 am

ruralavalon wrote:For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
My fund choices are slightly different, but I use the same 80/20 strategy with Vanguard Inst Index Plus (VIIIX) and Vang Tot Bond Mkt Inst (VBTIX). Seems to be working well so far. I love simplicity 8-)

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sun Dec 18, 2016 9:50 am

pkcrafter wrote:
steve187 wrote:Thanks for all the great advice! I can rebalance my account by transferring money currently invested to different funds within the plan and it also gives me the option to change how new contributions to my account will be invested. Or I can do both. What do you guys recommend? I was leaning towards just changing the new contributions. Is there usually a charge or fee when you rebalance? Thanks again.
Are you going to transfer all assets in the 401k to the two funds suggested by ruralavalon? Not sure why you need to rebalance. If you are going to keep some other funds, you should post them because the recommendation was based on holding just two funds. You can transfer from current holdings with no charge within the plan.

Yes I am going to go with the funds ruralavalon suggested. My question didn't make much sense. Thanks

Paul

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sun Dec 18, 2016 10:08 am

GordonG wrote:
ruralavalon wrote:For age 32 I suggest these funds in your 401k:
80%, Vanguard Value Index Fund Admiral Shares (VVIAX) ER 0.08%
20%, Vanguard Intermediate-term Bond Index Fund (VBILX) ER 0.09%
My fund choices are slightly different, but I use the same 80/20 strategy with Vanguard Inst Index Plus (VIIIX) and Vang Tot Bond Mkt Inst (VBTIX). Seems to be working well so far. I love simplicity 8-)
Thanks! Simplicity is the way I am going also.

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Re: 1st post! Need help picking funds for 401(k) please

Post by pkcrafter » Sun Dec 18, 2016 11:20 am

Steve, good choice. I think you can go a long way with just those two funds. Having said that, I wonder if it might be worth considering explorer small cap. It is actively managed and ER is 0.35%, but I would propose 15%, so not too bad. I would ask you, Ruralavalon, and others for your thoughts.

EDIT - VIIIX?? You didn't mention that before.


Here M* xray with 65% large value, 15% explorer, 20% int. bond

35 29 6 large
8 5 5 mid
2 3 6 small
mkt cap 42,641

Here is xray for 100% large value

43 36 7
9 4 1
0 0 0
mkt cap 77,351

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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ruralavalon
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Re: 1st post! Need help picking funds for 401(k) please

Post by ruralavalon » Sun Dec 18, 2016 12:11 pm

steve187 wrote:Thanks for all the great advice! I can rebalance my account by transferring money currently invested to different funds within the plan and it also gives me the option to change how new contributions to my account will be invested. Or I can do both. What do you guys recommend? I was leaning towards just changing the new contributions. Is there usually a charge or fee when you rebalance? Thanks again.
I suggest changing both the existing investments and future contributions to the two funds that I mentioned.

Vanguard Explorer Fund Admiral Shares (VEXRX) mentioned by pkcrafter is also a good fund, but I don't think I would personally add that small-cap growth fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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steve187
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Re: 1st post! Need help picking funds for 401(k) please

Post by steve187 » Sun Dec 18, 2016 1:38 pm

ruralavalon wrote:
steve187 wrote:Thanks for all the great advice! I can rebalance my account by transferring money currently invested to different funds within the plan and it also gives me the option to change how new contributions to my account will be invested. Or I can do both. What do you guys recommend? I was leaning towards just changing the new contributions. Is there usually a charge or fee when you rebalance? Thanks again.
I suggest changing both the existing investments and future contributions to the two funds that I mentioned.

Vanguard Explorer Fund Admiral Shares (VEXRX) mentioned by pkcrafter is also a good fund, but I don't think I would personally add that small-cap growth fund.
Cool! Thanks again, ruralavalon.

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