TRF vs Index Funds: My fork in the road

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
hancocd3
Posts: 20
Joined: Tue Jul 19, 2016 5:59 pm

TRF vs Index Funds: My fork in the road

Post by hancocd3 »

Emergency funds: Yes
Debt: None
Tax Filing Status: Single
Tax Rate: 25% Federal, 0% State
State of Residence: WA
Age: 28
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 40% of stocks

Current retirement assets

Taxable
Prosper.com Loaned $8k, $25 3yr/5yr loans averaging a return of 10%
$55k in loans to Small Businesses, (7%, 8%, and 25% APY)

401k ($76K)
54.6% Vanguard Target Retirement 2055 Institutional Fund (VIVLX) (0.10%)

18.1% Fidelity 500 Index Institutional Fund (FXSIX) (0.04%)
9% Fidelity US Bond Index Institutional Fund (FXSTX) (0.04%)
11.5% Fidelity International Index Institutional Fund (FXPNX) (0.06%)
4.5% Vanguard REIT Index Institutional Fund (FXSIX) (0.10%)
2.3% Fidelity Extended Market Index Institutional Fund (FSEVX) (0.07%)

6% Company Matching

Roth IRA at Vanguard ($13K)
100% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Contributions

New annual Contributions
$18k to 401k (employer matching is roughly an additional 4.5k)
$5.5k to Roth IRA
~$10k available for Taxable

Question:
I find myself with a 401k invested roughly 50/50 in a single Target Retirement Fund and a self built Portfolio of Index funds.

1. Which direction should I go from here? One VS the other, or a mix of both?
2. Is this merely a question of Simplicity VS Customization( and melding multiple Accounts)?
Last edited by hancocd3 on Thu Feb 23, 2017 5:15 pm, edited 1 time in total.
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

Re: Single Target Retirement Fund vs Multiple Index Funds

Post by aristotelian »

hancocd3 wrote:
1. Which direction should I go from here? One VS the other, or a mix of both?
2. Is this merely a question of Simplicity VS Customization( and melding multiple Accounts)?
1. Either/or. You have a good set of funds. No reason to change, although you will need to periodically rebalance the 401k.

2. Yes. Target Date fund has a slightly higher expense ratio in return for taking care of rebalancing automatically. Multiple accounts allow you to pick your balance, add your own "tilt", and rebalance manually.
rkhusky
Posts: 17763
Joined: Thu Aug 18, 2011 8:09 pm

Re: Single Target Retirement Fund vs Multiple Index Funds

Post by rkhusky »

What's the point of the non-TR funds in the 401K? You are duplicating stocks already in the TR fund. If you want to use TR2055 as a base and tilt towards a particular asset, you might add a tilt towards small value, REIT and/or emerging markets, which are common tilts. Or just go with TR2055 for simplicity and let Vanguard handle all the rebalancing and glide path adjustments for you.

Note that a 0.05% expense difference is worth about $50/year for a $100K portfolio. And that your portfolio will fluctuate more than that every day.
Post Reply