Can I construct a three-fund portfolio given my 401k choices?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
butforwales
Posts: 3
Joined: Mon Sep 24, 2018 5:23 pm

Can I construct a three-fund portfolio given my 401k choices?

Post by butforwales » Mon Sep 24, 2018 10:03 pm

Hello fellow Bogleheads,

Emergency funds: six months of expenses
Debt: car loan $13,000 at 0%
Tax Filing Status: Married Filing Jointly
Tax Rate: 12% Federal, 8% State
State of Residence: CA
Age: 44
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 40% of stocks

Current retirement assets

His 401k
$60,000 in stable value fund
His 403b from previous employer
$7,500 in Vanguard Target Retirement 2040

Contributions

New annual Contributions
$9,000 his 401k and $3000 employer match

Available funds
His 401k
EQUITY/STOCK
AM WASHINGTON MUTUAL / AWSHX / ER 0.57%
AMERI CENTURY MD CP VL I / AVUAX / ER 0.98%
AMERICAN AMCAP FUND CL R5 / RAFFX / ER 0.41%
AMERICAN EUROPACIFIC GR FD R5 / RERFX / ER 0.53%
AMERICAN NEW PERSPECTIVE R5 / RNPFX / ER 0.49%
BLACKROCK MSCI EAFE EQTY FD M / BMSCT ER 0.07%
EATON VANCE ATLANTA / EISMX / ER 0.94%
INVESCO QUANT SML VAL TRST III / ISTTT / ER 1.07%
JP MORGAN U.S. EQUITY FD CL R5 / JUSRX / ER 0.61%
MFS MASS INVESTORS GR STOCK R4 / MIGKX / ER 0.49%
PGIM JENNISON SMALL COMPA NY Z / PSCZX / ER 0.81%
PRINCIPAL REAL ESTATE SEC FD I / PIREX / ER 0.87%
VANGUARD TOTAL STOCK / VITSX / ER 0.04%
BOND/FIXED INCOME
BLACKROCK TOTAL RETRN PORTFOLI / MAHQX / ER 0.74%
BLACKROCK US DEBT INDEX FD W / DEDAT / ER 0.06%
BLACKROCK US TIPS NON LED CL W / BUSWT / ER 0.06%
IVY HIGH INCOME FUND CL I / IVHIX / ER 0.71%
ALLOCATION FUNDS
AMERICAN BALANCED FUND R5 / RLBFX / 0.33%
STABLE VALUE FUND
INVESCO STABLE VALUE RET CL 2 / ISVDT / 0.41%

Questions:
Convinced of the merits of the total market approach I would like to construct a three-fund portfolio using the selections available to me in my 401k plan, with 42% US stock, 28% international stock and 30% of US bonds.
The US stock selection is easy as Vanguard Total Stock (VITSX) is one of the choices.
When it comes to International Stocks there are two choices: AMERICAN EUROPACIFIC GR FD R5 (RERFX) which in another post was suggested as a reasonable stand-in for total international stock fund; and BLACKROCK MSCI EAFE EQTY FD M (BMSCT) which include 1000 stocks from developed economies. Neither seems to be true 'total international stock'?
Under bond funds BLACKROCK TOTAL RETRN PORTFOLI (MAHQX) and BLACKROCK US DEBT INDEX FD W (DEDAT) look like they could be total US bonds. The latter is listed as an 'unregistered investment' and I couldn't find the prospectus or other information about it.
How can I construct the three-fund portfolio out of these selections? Would VITSX/RERFX/MAHQX be the obvious combination?
Thanks!
Last edited by butforwales on Wed Sep 26, 2018 8:48 pm, edited 5 times in total.

LukeHeinz57
Posts: 104
Joined: Wed Sep 03, 2014 12:01 pm
Location: Ohio

Re: Can I construct a three-fund portfolio given my 401k choices?

Post by LukeHeinz57 » Tue Sep 25, 2018 6:45 am

AMERICAN EUROPACIFIC GR FD R5 looks good as a total International Stock market proxy to me. If I were going to pick a bond fund from that list it would be the BLACKROCK US DEBT INDEX FD W / DEDAT. It has an extremely low expense ratio and is a conservative intermediate-term bond fund.
"Contentment", the only thing you ever truly need more of!

User avatar
ruralavalon
Posts: 14257
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Can I construct a three-fund portfolio given my 401k choices?

Post by ruralavalon » Tue Sep 25, 2018 8:49 am

What are the expense ratios of each fund offered in your 401k? Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Expense ratios are a primary factor in fund selection.

These are probably the three best funds to use:
1) Vanguard Total Stock Market Index Fund Institutional (VITSX)
2) BlackRock MSCI EAFE Index Fund M (developed markets only)
3) BlackRock U.S. Debt Index Fund K

In your 401k materials or on the 401k website there should be a short fact sheet for any unregistered fund like BlackRock U.S. Debt. That's probably a Commingled Investment Trust (CIT) or Separate Account, and probably uses the Bloomberg Barclays U.S. Aggregate Bond Index, and would be a total bond market index fund.

A MSCI EAFE index fund is developed markets only, and does not include emerging markets. American Funds EuroPacific Growth is a good actively managed fund, with a higher expense ratio, that does cover both developed and emerging markets. I prefer a good index fund over a good actively managed fund.
Last edited by ruralavalon on Tue Sep 25, 2018 9:02 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
luminous
Posts: 102
Joined: Sat Dec 30, 2017 10:28 pm

Re: Can I construct a three-fund portfolio given my 401k choices?

Post by luminous » Tue Sep 25, 2018 8:59 am

butforwales wrote:
Mon Sep 24, 2018 10:03 pm
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 8% State
State of Residence: CA
Hello! Small note, if you are in the 8% bracket in CA then for 2018 you are probably in the 12% federal bracket. In any case the 25% federal bracket doesn’t exist anymore.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2026.

Post Reply