401(k) Changing Investment Offerings

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GeorgiaJune
Posts: 13
Joined: Thu Apr 06, 2017 7:55 pm

401(k) Changing Investment Offerings

Postby GeorgiaJune » Tue May 02, 2017 1:57 pm

I thought I had figured out where we were going to move our investments.

This was our initial plan:
Total portfolio is 173K
AA- 70 (with 20% international stock) stocks/30 bonds
Roths- 23K into Vanguard Total International stock fund VGTSX.
401k- 35K in Loomis Core Bond NERNX, 68K into Fidelity 500 Index Fund Premium Class FXSIX and 17k into Fidelity Ext market index FSEVX.
Taxable account- 10K into Vanguard NJ Long Term Tax Exempt VNJTX. We are right on the cusp of going to 35% tax rate so would prefer to keep some munis. 20K into Vanguard Balanced Index VBINX. Our thoughts on this was that we will be using this in 5-10 years so keeping it more conservative

Now, I just got notified that my 401(k) is switching many investments. The only bond fund offered is DoubleLine Core Fixed Income Fund Class I DBLFX (ER .48%). The 500 index fund FXSIX is still offered but the extended market fund FSEVX is not. The fund suggested to replace that is Fidelity Mid Cap Index Fund FSCKX (ER .07%). But I have no small caps offered in my 401(k) now and I wouldn’t have any in our Roths or Taxable in our plan.

Should I switch to have Fidelity International Index Fund FSIVX ER .08% in my 401(k) and have a small cap in one of our Roths -Vanguard Small-Cap Index Fund Investor Shares (NAESX) ER .18% or Vanguard Extended Market Index Fund Investor Shares (VEXMX) ER .21%? All the other funds in my 401(k) have pretty high ERs. There are a bunch of American Funds Target Date Retirement Funds with ERs between .4% and .6%, but everything else is over .6%. Or should I just stick to our plan and swap out the Extended Market Fund for the Mid Cap Index Fund and minimize my fees?

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nedsaid
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Joined: Fri Nov 23, 2012 12:33 pm

Re: 401(k) Changing Investment Offerings

Postby nedsaid » Sat Jun 17, 2017 4:49 pm

GeorgiaJune wrote:I thought I had figured out where we were going to move our investments.

This was our initial plan:
Total portfolio is 173K
AA- 70 (with 20% international stock) stocks/30 bonds
Roths- 23K into Vanguard Total International stock fund VGTSX.
401k- 35K in Loomis Core Bond NERNX, 68K into Fidelity 500 Index Fund Premium Class FXSIX and 17k into Fidelity Ext market index FSEVX.
Taxable account- 10K into Vanguard NJ Long Term Tax Exempt VNJTX. We are right on the cusp of going to 35% tax rate so would prefer to keep some munis. 20K into Vanguard Balanced Index VBINX. Our thoughts on this was that we will be using this in 5-10 years so keeping it more conservative

Now, I just got notified that my 401(k) is switching many investments. The only bond fund offered is DoubleLine Core Fixed Income Fund Class I DBLFX (ER .48%). The 500 index fund FXSIX is still offered but the extended market fund FSEVX is not. The fund suggested to replace that is Fidelity Mid Cap Index Fund FSCKX (ER .07%). But I have no small caps offered in my 401(k) now and I wouldn’t have any in our Roths or Taxable in our plan.

Should I switch to have Fidelity International Index Fund FSIVX ER .08% in my 401(k) and have a small cap in one of our Roths -Vanguard Small-Cap Index Fund Investor Shares (NAESX) ER .18% or Vanguard Extended Market Index Fund Investor Shares (VEXMX) ER .21%? All the other funds in my 401(k) have pretty high ERs. There are a bunch of American Funds Target Date Retirement Funds with ERs between .4% and .6%, but everything else is over .6%. Or should I just stick to our plan and swap out the Extended Market Fund for the Mid Cap Index Fund and minimize my fees?


I really hate it when a 401k switches investments. What I would do is switch the Extended Market Index fund for the Fidelity Mid Cap Index Fund. Mid Caps act a lot like Small Caps anyway and the bulk of the Extended Market Index would have been in Mid Caps anyway. You can get your small caps in an IRA or ROTH IRA account. The DoubleLine Core Fixed Income Fund looks like a perfectly fine bond investment. Morningstar rates it as a 4 star. Fees are 0.48%, which is reasonable and credit quality is medium and intermediate term.
A fool and his money are good for business.

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ruralavalon
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Location: Illinois

Re: 401(k) Changing Investment Offerings

Postby ruralavalon » Sun Jun 18, 2017 10:17 am

DoubleLine Core Fixed Income Fund Class I (DBLFX) ER 0.48% is a good intermediate-term, investment-grade bond fund with a moderate expense ratio. Switch to that in your 401k.

In the 401k I suggest simply using Fidelity 500 Index Fund Premium Class (FXSIX) ER 0.045% by itself for domestic stocks, skip mid/small caps. Although I suggest using a total stock market index fund where available, if not available an S&P 500 index fund 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 25 years since the creation of the first 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 fund has historically added little in performance.

I do not think that you should switch to have Fidelity International Index Fund (FSIVX) ER 0.08% in your 401(k), it covers only larger companies in developed markets except Canada. Emerging markets and Canada are both significant omissions in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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nedsaid
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Joined: Fri Nov 23, 2012 12:33 pm

Re: 401(k) Changing Investment Offerings

Postby nedsaid » Sun Jun 18, 2017 1:21 pm

The S&P 500 fund is an excellent investment and could serve as your US Stock investment for your 401k. I do like to tilt towards the smaller mid-caps and small-caps though. But yes, the S&P 500 is plenty good enough.
A fool and his money are good for business.

GeorgiaJune
Posts: 13
Joined: Thu Apr 06, 2017 7:55 pm

Re: 401(k) Changing Investment Offerings

Postby GeorgiaJune » Fri Jun 23, 2017 7:51 pm

We opened up a taxable account as vanguard too- is there a better international vanguard fund we should consider? AA 75/25, international 20%- currently in Fidelity 500 index fund (401k), vanguard extended market (Roths), doubleline core fixed income (401k), vanguard NJ muni bond fund (taxable), vanguard 500 (taxable) and Fidelity international index fund (401k).


ruralavalon wrote:DoubleLine Core Fixed Income Fund Class I (DBLFX) ER 0.48% is a good intermediate-term, investment-grade bond fund with a moderate expense ratio. Switch to that in your 401k.

In the 401k I suggest simply using Fidelity 500 Index Fund Premium Class (FXSIX) ER 0.045% by itself for domestic stocks, skip mid/small caps. Although I suggest using a total stock market index fund where available, if not available an S&P 500 index fund 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 25 years since the creation of the first 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 fund has historically added little in performance.

I do not think that you should switch to have Fidelity International Index Fund (FSIVX) ER 0.08% in your 401(k), it covers only larger companies in developed markets except Canada. Emerging markets and Canada are both significant omissions in my opinion.

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

Re: 401(k) Changing Investment Offerings

Postby ruralavalon » Sat Jun 24, 2017 8:04 am

GeorgiaJune wrote:We opened up a taxable account as vanguard too- is there a better international vanguard fund we should consider? AA 75/25, international 20%- currently in Fidelity 500 index fund (401k), vanguard extended market (Roths), doubleline core fixed income (401k), vanguard NJ muni bond fund (taxable), vanguard 500 (taxable) and Fidelity international index fund (401k).
. . . . .

Vanguard Total International Stock Index Fund VGTSX or VTIAX is very tax-efficient, and very diversified. It covers both larger and smaller companies, in both emerging and developed markets including Canada. It is a very good candidate for an international fund in your taxable account at Vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | | Wiki article link:Getting Started


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