International allocation in 401k

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investor997
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Joined: Tue Feb 07, 2017 3:23 pm

International allocation in 401k

Post by investor997 » Tue Oct 24, 2017 4:40 pm

This is the only international equity offering in my 401k:

FDIKX - Fidelity Diversified International Class K, ER = 0.92

There is no passive/index option available to me in this category. Because it’s pricey, I’ve avoided it thus far and compensated by tilting my other accounts (Taxable, Roth IRA) towards international investments. While 2017 has been a great year for international, I’m starting to get a little uncomfortable with this allocation and I’m considering moving some of it back towards the 401k and into FDIKX.

I know this fund isn’t an index and thus it’s not directly comparable to something like VTIAX, but when comparing the two on portfoliovisualizer, FDIKX seems to hold its own. It's outperformed the index in six of the past seven years. Yeah, I know, past performance blah blah, it’s not an index, it’s not the same, etc., but thems are the breaks. I have no other international choice available in my 401k.

Helping matters just slightly, my 401k Summary Plan Description notes that FDIKX pays a 0.20% revenue credit. This lowers the effective ER from 0.92 to 0.72. Still not great, but it helps.

So.. Should I?

Ron Scott
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Joined: Tue Apr 05, 2016 5:38 am

Re: International allocation in 401k

Post by Ron Scott » Tue Oct 24, 2017 4:47 pm

I wouldn't...

You know it's expensive. And there's no need to put money into international equities that I can see. I recommend a pass.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

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Vulcan
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Re: International allocation in 401k

Post by Vulcan » Tue Oct 24, 2017 4:53 pm

What's the problem with continuing to hold international in Roth and taxable?

investor997
Posts: 328
Joined: Tue Feb 07, 2017 3:23 pm

Re: International allocation in 401k

Post by investor997 » Tue Oct 24, 2017 5:01 pm

Vulcan wrote:
Tue Oct 24, 2017 4:53 pm
What's the problem with continuing to hold international in Roth and taxable?
Maybe there isn't and I'm making something out of nothing. That's what I'm hoping to find out.

BTW - my 401k is much larger than my other accounts, at least for now. At some point if I want to retire early, I'll have to draw from taxable investments before I can touch the others, so I'm a little concerned with how it'll do over the next ten years or so compared to something more balanced.

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sometimesinvestor
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Re: International allocation in 401k

Post by sometimesinvestor » Tue Oct 24, 2017 6:00 pm

Don't know if you file single or joint but its probably a good idea to have up to a 100k international in taxable (if single to take advantage of the foreign tax credit

student
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Joined: Fri Apr 03, 2015 6:58 am

Re: International allocation in 401k

Post by student » Tue Oct 24, 2017 6:02 pm

I thought it is best not to hold international in 401k due to the lost of foreign tax credit.

investor997
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Joined: Tue Feb 07, 2017 3:23 pm

Re: International allocation in 401k

Post by investor997 » Tue Oct 24, 2017 6:44 pm

sometimesinvestor wrote:
Tue Oct 24, 2017 6:00 pm
Don't know if you file single or joint but its probably a good idea to have up to a 100k international in taxable (if single to take advantage of the foreign tax credit
Single. What does this mean?

3funder
Posts: 720
Joined: Sun Oct 15, 2017 9:35 pm

Re: International allocation in 401k

Post by 3funder » Tue Oct 24, 2017 7:08 pm

Keep things as they are.

PFInterest
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Re: International allocation in 401k

Post by PFInterest » Tue Oct 24, 2017 7:12 pm

nope.
if you want intl there are better options to put in an IRA or taxable.

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sometimesinvestor
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Re: International allocation in 401k

Post by sometimesinvestor » Tue Oct 24, 2017 7:53 pm

investor997 wrote:
Tue Oct 24, 2017 6:44 pm
sometimesinvestor wrote:
Tue Oct 24, 2017 6:00 pm
Don't know if you file single or joint but its probably a good idea to have up to a 100k international in taxable (if single to take advantage of the foreign tax credit
Single. What does this mean?

The foreign tax credit is easy to take advantage of provided it is less than $300 if you file single and $600 if you file jointly . If you have a foreign tax credit bigger than that you have to use form 1116 which is a challenging form even if you use tax software If the dividend on your international fund is 3% than a $100k investment will provide a tax credit of 300

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