what investment?

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Topic Author
ConfusedUKGuy
Posts: 12
Joined: Wed Mar 14, 2012 10:25 pm

what investment?

Post by ConfusedUKGuy »

Hi Im trying to understand the best options for investments for my work 401K.

Im 41 and have only 18K saved to date and it is all invested with JP MORGAN 2040 SMARTRTIRMNT R6. I know this may not be the optimum strategy and would like advice on which stocks i should buy and which what percentage.

I currently have a pre-tax contribution of 5%. My Pre-Tax rate will automatically increase by 1% each year up to a maximum of 8%. My next increase is scheduled for January 2017.

Thank you in advance for your help!

These are the options:

Investment Type Symbol Price
EQUITY/STOCK
AMERICAN EUROPACIFIC GROWTH R6 Core RERGX $44.92
AMERICAN SMALLCAP WORLD Core RLLGX $46.46
COLUMBIA SMALL CAP VAL FD CL Y Core CRRYX $18.45
JOHN HANCOCK DISCIPLINED R6 Core JDVWX $19.63
LITHIA MOTORS INC CL A Core LAD $97.49
OPPENHEIMER DEVELOPING FD CL I Core ODVIX $31.32
STATE STREET RUSSELL SML/MID C Core YDSAT $33.65
STATE STREET S&P 500 INDEX C Core ZKSLT $49.31
STATE STREET SMALL CAP INDEX Core LRSXT $26.03
T ROWE PRICE BLUE CHIP GROWTH Core TRBCX $73.53
VANGUARD MID CAP GROWTH FUND Core VMGRX $22.65
VANGUARD SELECTED VALUE FD Core VASVX $29.86
BOND/FIXED INCOME
AMERICAN CENTURY INFLATION ADJ Core AIANX $11.61
GOLDMAN SACHS HIGH YIELD INSTL Core GSHIX $6.50
JANUS FLEXIBLE BOND FD CL I Core JFLEX $10.25
PIMCO LOW DURATION FD INST CL Core PTLDX $9.82
MONEY MARKET/STABLE VALUE
RETIREMENT BANK ACCOUNT Core IRSAI $1.00
BALANCED
MFS TOTAL RETURN FD CL R6 Core MSFKX $18.15
ALLOCATION FUNDS
JP MORGAN 2015 SMARTRTIRMNT R6 Core JSFYX $17.57
JP MORGAN 2020 SMARTRTIRMNT R6 Core JTTYX $18.34
JP MORGAN 2025 SMARTRTIRMNT R6 Core JNSYX $17.76
JP MORGAN 2030 SMARTRTIRMNT R6 Core JSMYX $19.10
JP MORGAN 2035 SMARTRTIRMNT R6 Core SRJYX $18.34
JP MORGAN 2040 SMARTRTIRMNT R6 Core SMTYX $19.68
JP MORGAN 2045 SMARTRTIRMNT R6 Core JSAYX $18.62
JP MORGAN 2050 SMARTRTIRMNT R6 Core JTSYX $18.61
JP MORGAN 2055 SMARTRTIRMNT R6 Core JFFYX $20.65
JP MORGAN INCM SMARTRTIRMNT R6 Core JSIYX $17.57
Jack FFR1846
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Re: what investment?

Post by Jack FFR1846 »

Please add the expense ratio after each fund.

Looking quickly, you've got a few Vanguard options. I'd expect that they'd be the lowest cost. With the little money you currently have invested, I'd stick with those, learn more here https://www.bogleheads.org/wiki/Main_Page then figure out what you want for your asset allocation and go from there.

You likely can put more than the % you talk about into your 401k. They're automatically investing an amount for you now (it's the opt out instead of opt in option) but you can certainly invest more. Look into a Roth on top of this. Many of us here put in the maximum allowed for each.
Bogle: Smart Beta is stupid
Gill
Posts: 6782
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Location: Florida

Re: what investment?

Post by Gill »

I would feel that target retirement fund for 2040 is perfect for you. Can you increase your contributions a bit?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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ruralavalon
Posts: 19711
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: what investment?

Post by ruralavalon »

Please add the expnse ratios for each fund as offered in your 401k. Expense ratios are a primary factor in fund selection. You can simply add this to your original post using the edit button, so that all of your information is in one place.

Low expenses are extremely important to long-term returns. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

In general these are the funds that look interesting so far:

STATE STREET S&P 500 INDEX C Core ZKSLT $49.31
STATE STREET SMALL CAP INDEX Core LRSXT $26.03
AMERICAN EUROPACIFIC GROWTH R6 Core RERGX $44.92
JANUS FLEXIBLE BOND FD CL I Core JFLEX $10.25
MFS TOTAL RETURN FD CL R6 Core MSFKX

But we do need to know those expense ratios for all the funds offered, to be sure which funds are better for you.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
ConfusedUKGuy
Posts: 12
Joined: Wed Mar 14, 2012 10:25 pm

Re: what investment?

Post by ConfusedUKGuy »

Thank you all for your responses... here are the expense ratios:

Fund Gross Expense Ratio
AMERICAN EUROPACIFIC GROWTH R6 0.49%
AMERICAN SMALLCAP WORLD 0.71%
COLUMBIA SMALL CAP VAL FD CL Y 0.84%
JOHN HANCOCK DISCIPLINED R6 0.72%
LITHIA MOTORS INC CL A N/A
OPPENHEIMER DEVELOPING FD CL I 0.87%
STATE STREET RUSSELL SML/MID C 0.06%
STATE STREET S&P 500 INDEX C 0.06%
STATE STREET SMALL CAP INDEX 0.06%
T ROWE PRICE BLUE CHIP GROWTH 0.71%
VANGUARD MID CAP GROWTH FUND 0.43%
VANGUARD SELECTED VALUE FD 0.39%

AMERICAN CENTURY INFLATION ADJ 0.27%
GOLDMAN SACHS HIGH YIELD INSTL 0.72%
JANUS FLEXIBLE BOND FD CL I 0.57%
PIMCO LOW DURATION FD INST CL 0.51%

RETIREMENT BANK ACCOUNT 1 N/A

MFS TOTAL RETURN FD CL R6 0.41%

JP MORGAN 2015 SMARTRTIRMNT R6 0.46%
JP MORGAN 2020 SMARTRTIRMNT R6 0.50%
JP MORGAN 2025 SMARTRTIRMNT R6 0.52%
JP MORGAN 2030 SMARTRTIRMNT R6 0.54%
JP MORGAN 2035 SMARTRTIRMNT R6 0.56%
JP MORGAN 2040 SMARTRTIRMNT R6 0.58%
JP MORGAN 2045 SMARTRTIRMNT R6 0.59%
JP MORGAN 2050 SMARTRTIRMNT R6 0.59%
JP MORGAN 2055 SMARTRTIRMNT R6 0.60%
JP MORGAN INCM SMARTRTIRMNT R6 0.45%
betablocker
Posts: 505
Joined: Mon Jan 11, 2016 1:26 pm

Re: what investment?

Post by betablocker »

Do you have other investments besides your 401k? You should look at everything together as one portfolio. If the answer is no, then save more and it looks like the 2040 isn't the worst option. It's a bit high on the expense side. For example, Vanguard's equivalent target date retirement fund is .16 vs .58%. It's not clear what's in your 2040 plan versus Vanguard or Fidelity. If you have any ability to influence your 401k plan, try to get Vanguard's Target Retirement plans put in.
Topic Author
ConfusedUKGuy
Posts: 12
Joined: Wed Mar 14, 2012 10:25 pm

Re: what investment?

Post by ConfusedUKGuy »

ruralavalon wrote:Please add the expnse ratios for each fund as offered in your 401k. Expense ratios are a primary factor in fund selection. You can simply add this to your original post using the edit button, so that all of your information is in one place.

Low expenses are extremely important to long-term returns. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

In general these are the funds that look interesting so far:

STATE STREET S&P 500 INDEX C Core ZKSLT $49.31
STATE STREET SMALL CAP INDEX Core LRSXT $26.03
AMERICAN EUROPACIFIC GROWTH R6 Core RERGX $44.92
JANUS FLEXIBLE BOND FD CL I Core JFLEX $10.25
MFS TOTAL RETURN FD CL R6 Core MSFKX

But we do need to know those expense ratios for all the funds offered, to be sure which funds are better for you.
Thank you all for your responses... here are the expense ratios:

Fund Gross Expense Ratio
AMERICAN EUROPACIFIC GROWTH R6 0.49%
AMERICAN SMALLCAP WORLD 0.71%
COLUMBIA SMALL CAP VAL FD CL Y 0.84%
JOHN HANCOCK DISCIPLINED R6 0.72%
LITHIA MOTORS INC CL A N/A
OPPENHEIMER DEVELOPING FD CL I 0.87%
STATE STREET RUSSELL SML/MID C 0.06%
STATE STREET S&P 500 INDEX C 0.06%
STATE STREET SMALL CAP INDEX 0.06%
T ROWE PRICE BLUE CHIP GROWTH 0.71%
VANGUARD MID CAP GROWTH FUND 0.43%
VANGUARD SELECTED VALUE FD 0.39%

AMERICAN CENTURY INFLATION ADJ 0.27%
GOLDMAN SACHS HIGH YIELD INSTL 0.72%
JANUS FLEXIBLE BOND FD CL I 0.57%
PIMCO LOW DURATION FD INST CL 0.51%

RETIREMENT BANK ACCOUNT 1 N/A

MFS TOTAL RETURN FD CL R6 0.41%

JP MORGAN 2015 SMARTRTIRMNT R6 0.46%
JP MORGAN 2020 SMARTRTIRMNT R6 0.50%
JP MORGAN 2025 SMARTRTIRMNT R6 0.52%
JP MORGAN 2030 SMARTRTIRMNT R6 0.54%
JP MORGAN 2035 SMARTRTIRMNT R6 0.56%
JP MORGAN 2040 SMARTRTIRMNT R6 0.58%
JP MORGAN 2045 SMARTRTIRMNT R6 0.59%
JP MORGAN 2050 SMARTRTIRMNT R6 0.59%
JP MORGAN 2055 SMARTRTIRMNT R6 0.60%
JP MORGAN INCM SMARTRTIRMNT R6 0.45%
User avatar
ruralavalon
Posts: 19711
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: what investment?

Post by ruralavalon »

In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

These are the funds I suggest using for a three-fund type portfolio in your 401k:

STATE STREET S&P 500 INDEX C Core (ZKSLT) ER 0.06%
AMERICAN EUROPACIFIC GROWTH R6 Core (RERGX) ER 0.49%
JANUS FLEXIBLE BOND FD CL I Core (JFLEX) ER 0.57%

I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (like STATE STREET S&P 500 INDEX in your 401k) is good enough for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 80% of the U.S. stock market, and in the 24 years since the creation of the total stock market fund the performance of the two types of funds has been almost identical. Morningstar “growth of $10k” graph, VFINX vs VTSMX. See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So adding mi/small cap stocks trying to mimic a total; ,market fund seems to add little or nothing to performance.

AMERICAN EUROPACIFIC GROWTH R6 Core (RERGX) ER 0.49% is a good actively manged international stock fund. It covers larger companies in both developed and emerging markets outside the U.S. About 13% of the fund is invested in the U.K.

JANUS FLEXIBLE BOND FD CL I Core (JFLEX) ER 0.57% is an actively managed, investment grade, intermediate term bond fund, with an average effective duration = 5.51 years and an average credit quality = BBB.

. . . . .

If instead you want to use a single balanced fund in your 401k, you could use this fund:

MFS TOTAL RETURN FD CL R6 Core (MSFKX) ER 0.41%

This is a good actively managed fund with an asset allocation of about 60/40 stocks bonds, with about 10% of stocks in non-U.S. stocks.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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