401k Allocation Advice

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Topic Author
mikemagz11
Posts: 63
Joined: Mon Nov 21, 2016 1:37 pm
Location: Hoboken, NJ

401k Allocation Advice

Post by mikemagz11 »

Age: 27
Desired Asset allocation: At least 70% in stocks

I currently contribute 7% but am thinking of upping it to 10%. I get no match through my employer.

Here is a breakdown of my asset classes:

75.83% Multi Asset
19.85% Equities
4.32% Fixed Income


Here is a list of my current holdings:

TIAA-CREF Lifecycle 2055 Fund - Retirement Class .70% net exp ratio (75.82% of assets)
CREF Growth R1 .65% net exp ratio (9.80% of assets)
Vanguard 500 Index Fund Admiral .05% net exp ratio (5.14% of assets)
Vanguard Total International Stock Index Fund Admiral .12% net exp ratio (4.91% of assets)
Vanguard Total Bond Market Index Fund Admiral .06% net exp ratio (4.32% of assets)


Here is a list of the other investment options I have:

American Beacon Large Cap Value Fund Institutional Class
Symbol: AADEX .59% net exp
American Funds EuroPacific Growth Fund - R6
Symbol: RERGX .50% net exp
CREF Money Market Account (R1)
.61% net exp
CREF Social Choice Account (R1)5
Symbol: QCSCRX .65% net exp
Delaware Small Cap Value Fund Institutional Class
Symbol: DEVIX .96% net exp
Loomis Sayles Small Cap Growth Fund Retail Class Shares
Symbol: LCGRX 1.19% net exp
Metropolitan West Total Return Bond Fund Class I
Symbol: MWTIX .44% net exp
TIAA Real Estate Account10
Symbol: QREARX .89% net exp
TIAA-CREF Lifecycle 2010 Fund (Retirement)
Symbol: TCLEX .62% net exp
TIAA-CREF Lifecycle 2015 Fund (Retirement)
Symbol: TCLIX .63% net exp
TIAA-CREF Lifecycle 2020 Fund (Retirement)
Symbol: TCLTX .65% net exp
TIAA-CREF Lifecycle 2025 Fund (Retirement)
Symbol: TCLFX .66% net exp
TIAA-CREF Lifecycle 2030 Fund (Retirement)
Symbol: TCLNX .67% net exp
TIAA-CREF Lifecycle 2035 Fund (Retirement)
Symbol: TCLRX .68% net exp
TIAA-CREF Lifecycle 2040 Fund (Retirement)
Symbol: TCLOX .69% net exp
TIAA-CREF Lifecycle 2045 Fund (Retirement)
Symbol: TTFRX .70% net exp
TIAA-CREF Lifecycle 2050 Fund (Retirement)
Symbol: TLFRX .70% net exp
TIAA-CREF Lifecycle 2060 Fund (Retirement)
Symbol: TLXRX .70% net exp
TIAA-CREF Lifecycle Retirement Income Fund (Retirement)
Symbol: TLIRX .62% net exp
TIAA-CREF Mid-Cap Growth Fund (Retirement)
Symbol: TRGMX .72% net exp
TIAA-CREF Mid-Cap Value Fund (Retirement)
Symbol: TRVRX .67% net exp
Vanguard Extended Market Index Fund Admiral
Symbol: VEXAX .09% net exp
Vanguard Inflation Protected Securities Fund Admiral
Symbol: VAIPX .10% net exp


Questions:

I am hoping for some feedback on my current asset allocation and would like to know if there are better funds for me to use with smaller exp ratios. I am young so am willing to take more risk right now. Thanks for any advice!
Jack FFR1846
Posts: 13089
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: 401k Allocation Advice

Post by Jack FFR1846 »

mikemagz11 wrote:
TIAA-CREF Lifecycle 2055 Fund - Retirement Class .70% net exp ratio (75.82% of assets)
CREF Growth R1 .65% net exp ratio (9.80% of assets)

Vanguard 500 Index Fund Admiral .05% net exp ratio (5.14% of assets)
Vanguard Total International Stock Index Fund Admiral .12% net exp ratio (4.91% of assets)
Vanguard Total Bond Market Index Fund Admiral .06% net exp ratio (4.32% of assets)



Here is a list of the other investment options I have:

American Beacon Large Cap Value Fund Institutional Class
Symbol: AADEX .59% net exp
American Funds EuroPacific Growth Fund - R6
Symbol: RERGX .50% net exp
CREF Money Market Account (R1)
.61% net exp
CREF Social Choice Account (R1)5
Symbol: QCSCRX .65% net exp
Delaware Small Cap Value Fund Institutional Class
Symbol: DEVIX .96% net exp
Loomis Sayles Small Cap Growth Fund Retail Class Shares
Symbol: LCGRX 1.19% net exp
Metropolitan West Total Return Bond Fund Class I
Symbol: MWTIX .44% net exp
TIAA Real Estate Account10
Symbol: QREARX .89% net exp
TIAA-CREF Lifecycle 2010 Fund (Retirement)
Symbol: TCLEX .62% net exp
TIAA-CREF Lifecycle 2015 Fund (Retirement)
Symbol: TCLIX .63% net exp
TIAA-CREF Lifecycle 2020 Fund (Retirement)
Symbol: TCLTX .65% net exp
TIAA-CREF Lifecycle 2025 Fund (Retirement)
Symbol: TCLFX .66% net exp
TIAA-CREF Lifecycle 2030 Fund (Retirement)
Symbol: TCLNX .67% net exp
TIAA-CREF Lifecycle 2035 Fund (Retirement)
Symbol: TCLRX .68% net exp
TIAA-CREF Lifecycle 2040 Fund (Retirement)
Symbol: TCLOX .69% net exp
TIAA-CREF Lifecycle 2045 Fund (Retirement)
Symbol: TTFRX .70% net exp
TIAA-CREF Lifecycle 2050 Fund (Retirement)
Symbol: TLFRX .70% net exp
TIAA-CREF Lifecycle 2060 Fund (Retirement)
Symbol: TLXRX .70% net exp
TIAA-CREF Lifecycle Retirement Income Fund (Retirement)
Symbol: TLIRX .62% net exp
TIAA-CREF Mid-Cap Growth Fund (Retirement)
Symbol: TRGMX .72% net exp
TIAA-CREF Mid-Cap Value Fund (Retirement)
Symbol: TRVRX .67% net exp

Vanguard Extended Market Index Fund Admiral
Symbol: VEXAX .09% net exp
Vanguard Inflation Protected Securities Fund Admiral
Symbol: VAIPX .10% net exp
Add some extended market and dump the higher ER funds you currently have. My two cents worth.
Bogle: Smart Beta is stupid
Dilbydog
Posts: 99
Joined: Mon May 23, 2016 10:17 pm

Re: 401k Allocation Advice

Post by Dilbydog »

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ruralavalon
Posts: 20183
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401k Allocation Advice

Post by ruralavalon »

Assety allocation.
mikemagz11 wrote:Age: 27
Desired Asset allocation: At least 70% in stocks
At age 27, I suggest about 20 - 25% in bonds. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see also William Bernstein, "The Rebalancing Bonus".

Please see the wiki articles Bogleheads® investment philosophy, "Never bear too much or too little risk", "Risk tolerance", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6).

That works out to about: 20% bonds; 20% international stocks; and 60% domestic stocks.


Fund selection.
Here is my two cents:
60%, Vanguard 500 Index Fund Admiral, ER 0.05%
20%, Vanguard Total International Stock Index Fund Admiral, ER 0.12%
20%, Vanguard Total Bond Market Index Fund Admiral, ER 0.06%

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".

I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard 500 Index Fund 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 it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market funds has historically added little or nothing in performance.

Low expense ratios are critical to investing performance. 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.”
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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