New to Investing! / 401k Advice

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binheads
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New to Investing! / 401k Advice

Post by binheads » Thu Mar 01, 2018 7:48 pm

Hi everyone.

I am entirely new to this game and feel completely ignorant as far as investing goes. I am 31 years old and have only been contributing to a Roth 401k since August of 2016. I feel like I have some major catching up to do and I plan on slowly immersing myself in investing using the educational tools and links available on Bogleheads.

I do not make much money (roughly 45K/year) but I have no debt and have been able to save enough in the last three years to realize I should be putting those savings to work considering I do not ever anticipate a large purchase like buying a home. A couple of weeks ago I opened a Roth IRA account and contributed the max for 2017 and 2018. It was at this point that I felt overwhelmingly unsure of what I was doing. A friend recommended a fund (Vanguard LifeStrategy Growth Fund) and pointed me in the direction of this website.

I think the only thing I have done right to this point is maximizing the employer contribution to my 401k. As I try to learn more about this stuff I would love in the meantime to get some (hopefully) simple advice about which of the below investment choices make sense for my 401k. I do not mind higher risk and I will not be monitoring closely, so volatility of the market will not bother me. I probably have at least 30 years before retirement. My goal would be to retire by age 65 but I would consider that a moving target. I would love to be on autopilot as much as possible with my retirement accounts.

I hope it is not bad practice to paste all of these options! I am just looking for some peace of mind that I am at least choosing wisely from the options currently available through my workplace (they use Fidelity). I am currently investing in VANG TARGET RET 2050 (VFIFX)06/07/2006. Have I provided enough information for a suggestion or is this way too vague of a request for someone to simply say, "I'd go with this". Very sorry if so guys, I am just trying to take baby steps and learn the language a little.

Name/Inception Date Gross Expense Ratio
DFA US LG CAP VAL (DFLVX)02/19/1993 0.37%
FID 500 INDEX PR (FUSVX)02/17/1988 0.04%
FID CONTRAFUND (FCNTX)05/17/1967 0.68%
JPM US RSH ENH EQ L (JPIEX)01/03/1997 0.45%
FID EXT MKT IDX PR (FSEVX)11/05/1997 0.07%
JH DSCPL VAL MDCP I (JVMIX)06/02/1997 0.86%
MM SEL MID CAP GR R5 (MGRFX)05/31/2000 0.82%
HTFD SM CAP GROWTH Y (HSLYX)02/19/2002 0.83%
NORTHERN SM CAP VAL (NOSGX)03/31/1994 1.14%
AF EUROPAC GRTH R4 (REREX)04/16/1984 0.85%
FID INTL INDEX PR (FSIVX)11/05/1997 0.06%
OPP DEVELOPING MKT Y (ODVYX)11/18/1996 1.07%
OPP INTL SM MID CO Y (OSMYX)11/17/1997 1.17%
FID PURITAN (FPURX)04/16/1947 0.55%
VANG TARGET RET 2015 (VTXVX)10/27/2003 0.13%
VANG TARGET RET 2020 (VTWNX)06/07/2006 0.13%
VANG TARGET RET 2025 (VTTVX)10/27/2003 0.14%
VANG TARGET RET 2030 (VTHRX)06/07/2006 0.14%
VANG TARGET RET 2035 (VTTHX)10/27/2003 0.14%
VANG TARGET RET 2040 (VFORX)06/07/2006 0.15%
VANG TARGET RET 2045 (VTIVX)10/27/2003 0.15%
*VANG TARGET RET 2050 (VFIFX)06/07/2006 0.15%*
VANG TARGET RET 2055 (VFFVX)08/18/2010 0.15%
VANG TARGET RET 2060 (VTTSX)01/19/2012 0.15%
VANG TARGET RET INC (VTINX)10/27/2003 0.13%
TRP STABLE VALUE A09/12/1988 0.30%
FID US BOND IDX PR (FSITX)03/08/1990 0.05%
PIMCO INCOME ADM (PIINX)03/30/2007 0.78%
PRU TOTAL RTN BD A (PDBAX)01/10/1995 0.80%
TMPL GLOBAL BOND ADV (TGBAX)09/18/1986 0.74%


Thank you very much for whatever insight you can offer,
B

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fortfun
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Re: New to Investing! / 401k Advice

Post by fortfun » Thu Mar 01, 2018 8:10 pm

If you want to be on Autopilot, the Vanguard Target date is a very good choice with very low fees. You might be able to make a bit more with total index us, international, and bonds, but you'll need to spend time re-balancing each year.

RadAudit
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Re: New to Investing! / 401k Advice

Post by RadAudit » Thu Mar 01, 2018 8:32 pm

fortfun wrote:
Thu Mar 01, 2018 8:10 pm
If you want to be on Autopilot, the Vanguard Target date is a very good choice with very low fees. You might be able to make a bit more with total index us, international, and bonds, but you'll need to spend time re-balancing each year.
+1. It's a good place to start and a great place to stay. Just add money.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The Calvary isn't coming, kids. You are on your own.

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Duckie
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Re: New to Investing! / 401k Advice

Post by Duckie » Thu Mar 01, 2018 9:07 pm

bin49msu, welcome to the forum.
bin49msu wrote:I am just looking for some peace of mind that I am at least choosing wisely from the options currently available through my workplace (they use Fidelity).
The best options are:
  • FID 500 INDEX PR (FUSVX) 0.04% -- Large caps, 80% of US stocks
  • FID EXT MKT IDX PR (FSEVX) 0.07% -- Mid/small caps, 20% of US stocks
  • FID INTL INDEX PR (FSIVX) 0.06% -- Developed markets, ~75% of international stocks
  • FID US BOND IDX PR (FSITX) 0.05% -- US bonds
  • or the VANG TARGET RET fund that meets your AA
You pick a target-date fund by the AA inside, not the date in the title. TR2050 has an AA of 90% stocks, 10% bonds. Your LifeStrategy Growth fund has an AA of 80% stocks, 20% bonds. At your age I'd go with 80/20 so if you want to use a target-date fund in the 401k instead of the individual funds then TR2035 would be closer.

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ruralavalon
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Re: New to Investing! / 401k Advice

Post by ruralavalon » Fri Mar 02, 2018 10:05 am

Welcome to the forum :) .

It's good to see that you are debt free.

At age 31, you shouldn't feel that you have major catching up to do.

Vanguard LifeStrategy Growth Fund (VASGX) is a good choice for your Roth IRA.

Vanguard Target Retirement 2050 (VFIFX) is a good choice for your 401k.

It's good that you have been contributing enough to get the employer match. Staying on autopilot as much as possible is a good idea.

The only additional thing you need to do make sure you are contributing enough to investing. As RadAudit said, "just add money". Increase the automatic contributions to your 401k to the highest rate you can comfortably sustain.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

binheads
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Re: New to Investing! / 401k Advice

Post by binheads » Mon Mar 05, 2018 1:04 pm

Thank you everyone for the replies!

As a follow-up question - is it in any way a mistake to contribute the max to my Roth IRA each year, yet not be all that close to hitting the max on my Roth 401K contributions? Like is that $5.5K better divvied up and sent towards my 401K? I like the idea of having my IRA contributions as an emergency fund that (as far as I understand) would have no penalty for withdrawal on my own contributions.

I am currently contributing 30% of my paychecks to my 401K in an effort to play catch-up and I could realistically bump that to between 40-50% in my present financial circumstances.

Again, I appreciate any insight :)

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Duckie
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Re: New to Investing! / 401k Advice

Post by Duckie » Mon Mar 05, 2018 5:14 pm

binheads wrote:Is it in any way a mistake to contribute the max to my Roth IRA each year, yet not be all that close to hitting the max on my Roth 401K contributions? Like is that $5.5K better divvied up and sent towards my 401K?
It is not a mistake. Your good 401k options are very inexpensive and the Roth IRA may have slightly higher expense ratios, but that's not enough of a reason to avoid maxing the Roth IRA, especially since you can liquidate it in an emergency.

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ruralavalon
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Re: New to Investing! / 401k Advice

Post by ruralavalon » Tue Mar 06, 2018 9:19 am

binheads wrote:
Mon Mar 05, 2018 1:04 pm
Thank you everyone for the replies!

As a follow-up question - is it in any way a mistake to contribute the max to my Roth IRA each year, yet not be all that close to hitting the max on my Roth 401K contributions? Like is that $5.5K better divvied up and sent towards my 401K? I like the idea of having my IRA contributions as an emergency fund that (as far as I understand) would have no penalty for withdrawal on my own contributions.
Neither way would be a mistake, because excellent funds are available in both accounts.

binheads wrote:I am currently contributing 30% of my paychecks to my 401K in an effort to play catch-up and I could realistically bump that to between 40-50% in my present financial circumstances.
It's good to see the 30% contribution rate, a high contribution rate is the best way to play catch-up.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Chris001122
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Re: New to Investing! / 401k Advice

Post by Chris001122 » Tue Mar 06, 2018 9:35 am

If you are 31, one option is to hold your age in percentage of bonds (31%) with the rest in a good, low cost stock mutual fund like VTSAX. You can make 25% of the stock into international if you like that. Then rebalance every year since you get older each year. Keep raising the bond % with your age. Use a good, low-cost bond mutual fund.

This has been shown to be a very good strategy for growing wealth. For more, read the excellent book, "Bogleheads Guide to Investing". It will tell you why this is a good strategy. There are other strategies that will work of course, but this is a simple one and very effective with lots of restful sleep at night.

Good luck and God bless! Don't worry about starting late. I was lazy about it in my twenties, too, and still made it to the two comma club by age 50.
"It's always been a mistake to bet against the United States since 1776." - Warren Buffett

pkcrafter
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Re: New to Investing! / 401k Advice

Post by pkcrafter » Tue Mar 06, 2018 10:06 am

Welcome to the forum. Posting all your 401k options is not a bad practice, it's recommended. You have provided enough information, but here's the official suggested posting format if ever needed.

viewtopic.php?f=1&t=6212

Does your employer offer any match to your 401k contributions?

Your friend gave you good advice. Your lifestrategy fund is 80% stock and your TR2050 is 90% stock. I, and some others, don't recommend holding more than 80% stock because the returns are close to a 90% fund with more reduction in risk.

Here's info on LS and TR funds. As noted, do not choose by date, choose by desired asset allocation.

https://investor.vanguard.com/mutual-fu ... mpgn=PS:RE

https://investor.vanguard.com/mutual-fu ... mpgn=PS:RE

Either the LS or TR funds are good choices, especially when initially building up assets. They contain all the major asset classes, auto rebalance and low cost. Here's info on the recommended 3 fund portfolio. The LS and TR fund are basically 4 fund because they hold international bonds in additions to U.S. bonds. The 3-fund is at the core of Boglehead investing.

viewtopic.php?f=10&t=88005

It sounds like you are aware of the Wiki, but here's a post to getting started.

https://www.bogleheads.org/wiki/Getting_started


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Dottie57
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Re: New to Investing! / 401k Advice

Post by Dottie57 » Tue Mar 06, 2018 10:15 am

RadAudit wrote:
Thu Mar 01, 2018 8:32 pm
fortfun wrote:
Thu Mar 01, 2018 8:10 pm
If you want to be on Autopilot, the Vanguard Target date is a very good choice with very low fees. You might be able to make a bit more with total index us, international, and bonds, but you'll need to spend time re-balancing each year.
+1. It's a good place to start and a great place to stay. Just add money.
+1

Wish they had been available when I first started.

gmaynardkrebs
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Re: New to Investing! / 401k Advice

Post by gmaynardkrebs » Tue Mar 06, 2018 10:45 am

The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.

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ruralavalon
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Re: New to Investing! / 401k Advice

Post by ruralavalon » Tue Mar 06, 2018 12:14 pm

gmaynardkrebs wrote:
Tue Mar 06, 2018 10:45 am
The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.
That is not correct.

Vanguard Target Retirement 2050 does have a high (90%) allocation to equities, but it does not stay high for 32 years until retirement age. For example Vanguard Target Retirement 2020 has transitioned to just 55% equities, and Vanguard Target Retirement 2015 has transitioned to just 45% equities.

Also as pkcrafter and Duckie both have noted you can choose a target date fund which starts with with a lower, less risky equity allocation as you wish. Select a target date fund to use according to its current asset allocation, not according to the year stated in the fund name. The key advantage of this type of balanced fund is its simplicity, it gives very broad diversification in both stocks and bonds in a single all-in-one type investment.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

gmaynardkrebs
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Re: New to Investing! / 401k Advice

Post by gmaynardkrebs » Tue Mar 06, 2018 12:28 pm

ruralavalon wrote:
Tue Mar 06, 2018 12:14 pm
gmaynardkrebs wrote:
Tue Mar 06, 2018 10:45 am
The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.
This is, not correct. Vanguard Target Retirement 2050 does have a high (90%) allocation to equities, but it does not stay high for 32 years until retirement age. For example Vanguard Target Retirement 2020 has transitioned to just 55% equities, and Vanguard Target Retirement 2015 has transitioned to just 45% equities.
If the market crashes at age 60, the fact that the allocation isn't as high as it was when you were 30 or 40 will be of scant comfort.

azurekep
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Re: New to Investing! / 401k Advice

Post by azurekep » Tue Mar 06, 2018 12:37 pm

gmaynardkrebs wrote:
Tue Mar 06, 2018 10:45 am
The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.
FPURX is not a bad fund. It's one of two balanced funds that Fidelity offers (FBALX not being offered in the 401K). The ER is .55 which is more than the Vanguard funds and the fund is actively managed, but it's an easy way to get something closer to 60/40 (though it can go as high as 70% equity.) Something to consider in addition to the Vanguard funds.

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Shackleton
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Re: New to Investing! / 401k Advice

Post by Shackleton » Tue Mar 06, 2018 1:33 pm

gmaynardkrebs wrote:
Tue Mar 06, 2018 12:28 pm
ruralavalon wrote:
Tue Mar 06, 2018 12:14 pm
gmaynardkrebs wrote:
Tue Mar 06, 2018 10:45 am
The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.
This is, not correct. Vanguard Target Retirement 2050 does have a high (90%) allocation to equities, but it does not stay high for 32 years until retirement age. For example Vanguard Target Retirement 2020 has transitioned to just 55% equities, and Vanguard Target Retirement 2015 has transitioned to just 45% equities.
If the market crashes at age 60, the fact that the allocation isn't as high as it was when you were 30 or 40 will be of scant comfort.
By the time he is 60, the allocation would be 60/40 or 55/45 for the ENTIRE portfolio (if still all invested in the same target fund. So it would be a comfort. I don’t think gmaynardkrebs fully understands how the target date funds work.
“Superhuman effort isn't worth a damn unless it achieves results.” ~Ernest Shackleton

gmaynardkrebs
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Re: New to Investing! / 401k Advice

Post by gmaynardkrebs » Tue Mar 06, 2018 2:37 pm

Shackleton wrote:
Tue Mar 06, 2018 1:33 pm
gmaynardkrebs wrote:
Tue Mar 06, 2018 12:28 pm
ruralavalon wrote:
Tue Mar 06, 2018 12:14 pm
gmaynardkrebs wrote:
Tue Mar 06, 2018 10:45 am
The Vanguard TD 2050 has a very high allocation to equities, which means 32 years of opportunities for the stock market to crash and possibly stay crashed during most if not all of your retirement. Others views will differ, but to me that allocation is too risky for a retirement program.
This is, not correct. Vanguard Target Retirement 2050 does have a high (90%) allocation to equities, but it does not stay high for 32 years until retirement age. For example Vanguard Target Retirement 2020 has transitioned to just 55% equities, and Vanguard Target Retirement 2015 has transitioned to just 45% equities.
If the market crashes at age 60, the fact that the allocation isn't as high as it was when you were 30 or 40 will be of scant comfort.
By the time he is 60, the allocation would be 60/40 or 55/45 for the ENTIRE portfolio (if still all invested in the same target fund. So it would be a comfort. I don’t think gmaynardkrebs fully understands how the target date funds work.
I think I do mostly do understand target date funds, and I do acknowledge that on a percentage basis, losing 1/2 of 60% is not as bad as losing 1/2 of 90%. However, the dollar loss at age 60, even with a 55% allocation, is going to dwarf whatever the number would be at age 30 or 40, simply because you have saved so much more in the ensuing years. That amount is going to hurt, at least for many people. I will admit that I personally am more of "saver" than an "investor." Knowing that, I save more of my income than most people, and don't wish to rely on hoped for, but hardly guaranteed returns from the equity risk premium, which if it ever existed, seems to have shrunk precipitously today. I only put that out there as something for the person who asked the question to consider, not as the right answer for him or her, which I think goes without saying on this board.

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welderwannabe
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Re: New to Investing! / 401k Advice

Post by welderwannabe » Tue Mar 06, 2018 2:43 pm

Stick with the Vanguard Target 2050. Its easy.

Thats where I had all my megacorp 401k money in before they removed Vanguard target date's from my plan and replaced it with higher fee stuff.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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