401k Options help (beginner)
401k Options help (beginner)
Hi,
I’ve recently decided to take a more active role with my 401k plan through my work after having been enrolled in the Goalmaker Plan through Prudential for the passed 5 years. Currently I’m in a “Conservative, 16+ year to retirement” plan. I called my representative to ask about Vanguard Target Retirement funds but it seems there aren’t any. They did give me a list of the investment options I do have however I know that some of the ER are high but I don’t really know what alternatives are better. If you could you please take a look and offer any help/ advice in what I should get rid of or add I’d appreciate it.
Here is some background info to start with:
Emergency Funds: 6 months saved
Debit: credit cards ~$500, car payment $250/ month
Tax Filing status: Single
Tax Rate: 25% Federal, 9.3% State
State: California
Age: 32 Female
Desired Assest Allocation: 80% stocks, 20% bonds (I think I'm currently about 69.5% stocks and 30.4% bonds)
Accounts: 401k through my employer and American Mutual Fund (AMRMX) worth about $20,000
Also plan on opening a Roth IRA with Vanguard by the end of this year in which I'll invest $5500 towards a Vangaurd Target Retirement Fund 2050.
Here is what I am currently invested in:
Guaranteed Income Fund(Stable Value) 14.39% / (0%)
PGIM Total Return Bond Z(Fixed Income -Intermediate Bond)10.93% / (0.51%)
PIMCO Income Instl(Fixed Income-Multisector) 5.07% (0.74%)
Invesco Diversified Dividend R5 (Large Cap Stock - Value) 9.95% / (0.52%)
iShares S&P 500 Index K (Large Cap Stock - Blend) 10.39% / (0.04%)
Fidelity Contrafund Commingled Pool (Large Cap Stock - Growth) 5.32% / (0.43%)
Vanguard Growth Index Institutional (Large Cap Stock - Growth) 5.30% / (0.04%)
PGIM QMA Mid-Cap Value R6 (Mid Cap Stock - Value) 2.80% / (0.73%)
Vanguard Mid Cap Index Institutional (Mid Cap Stock - Blend) 1.99% / (0.04%)
Eaton Vance Atlanta Capital SMID-Cap I (Mid Cap Stock - Growth) 3.10% (0.94%)
DFA US Targeted Value I (Small Cap Stock - Value) 2.95% / (0.37%)
PIMCO StocksPLUS Small Institutional (Small Cap Stock - Blend) 2.03% / (0.79%)
T. Rowe Price QM US Small-Cap Gr Eq I (Small Cap Stock - Growth) 3.14% / (0.66%)
PIMCO StocksPLUS Intl (USD-Hedged) Inst (International Stock - Blend) 11.78% / (0.84%)
American Funds Europacific Growth R6 (International Stock - Growth) 10.86% / (0.49%)
Here are the other investment options offered (and their expense ratios):
Fixed Income-Intermediate Bond:
PGIM Total Return Bond Z 0.52%
BbgBarc US Agg Bond TR USD N/A
Fixed Income- Multisector:
PIMCO Income Instl 0.74%
BbgBarc US Universal TR USD N/A
Retirement Income-Income Flex:
Prudential Day One IncomeFlex Target Balanced Fund 1.34%
Morningstar Lifetime Mod Incm TR USD N/A
Large Cap Stock- Value:
Invesco Diversified Dividend R5 0.54%
Russell 1000 Value TR USD N/A
Large Cap Stock- Blend:
iShares S&P 500 Index K 0.04%
Russell TR USD N/A
Large Cap Stock- Growth:
Fidelity Contrafund Commingled Pool 0.43%
Russell 1000 Growth TR USD N/A
Vanguard Growth Index Institutional 0.04%
Russell 1000 Growth TR USD N/A
Mid Cap Stock-Value:
PGIM QMA Mid-Cap Value R6 0.77%
Russell Mid Cap Value TR USD N/A
Mid Cap Stock- Blend:
Vanguard Mid Cap Index Institutional 0.04%
Russell Mid Cap TR USD N/A
Mid Cap Stock- Growth:
Eaton Vance Atlanta Capital SMID 0.94%
Russell Mid Cap Growth TR USD N/A
Small Cap Stock- Value:
DFA US Targeted Value 1 0.37%
Russell 2000 Value TR USD N/A
Small Cap Stock- Blend:
PIMCO StocksPLUS Small 0.79%
Russell 2000 TR USD N/A
Small Cap Stock- Growth:
T. Rowe Price QM US Small-Cap Gr 0.66%
Global Stock- Growth:
American Funds New Perspective R6 0.45%
International Stock- Blend:
PIMCO StocksPLUS Intl 0.84%
MSCI ACWI N/A
International Stock- Growth:
American Funds Europacific Growth R6 0.49%
Thank you so much for your help!
I’ve recently decided to take a more active role with my 401k plan through my work after having been enrolled in the Goalmaker Plan through Prudential for the passed 5 years. Currently I’m in a “Conservative, 16+ year to retirement” plan. I called my representative to ask about Vanguard Target Retirement funds but it seems there aren’t any. They did give me a list of the investment options I do have however I know that some of the ER are high but I don’t really know what alternatives are better. If you could you please take a look and offer any help/ advice in what I should get rid of or add I’d appreciate it.
Here is some background info to start with:
Emergency Funds: 6 months saved
Debit: credit cards ~$500, car payment $250/ month
Tax Filing status: Single
Tax Rate: 25% Federal, 9.3% State
State: California
Age: 32 Female
Desired Assest Allocation: 80% stocks, 20% bonds (I think I'm currently about 69.5% stocks and 30.4% bonds)
Accounts: 401k through my employer and American Mutual Fund (AMRMX) worth about $20,000
Also plan on opening a Roth IRA with Vanguard by the end of this year in which I'll invest $5500 towards a Vangaurd Target Retirement Fund 2050.
Here is what I am currently invested in:
Guaranteed Income Fund(Stable Value) 14.39% / (0%)
PGIM Total Return Bond Z(Fixed Income -Intermediate Bond)10.93% / (0.51%)
PIMCO Income Instl(Fixed Income-Multisector) 5.07% (0.74%)
Invesco Diversified Dividend R5 (Large Cap Stock - Value) 9.95% / (0.52%)
iShares S&P 500 Index K (Large Cap Stock - Blend) 10.39% / (0.04%)
Fidelity Contrafund Commingled Pool (Large Cap Stock - Growth) 5.32% / (0.43%)
Vanguard Growth Index Institutional (Large Cap Stock - Growth) 5.30% / (0.04%)
PGIM QMA Mid-Cap Value R6 (Mid Cap Stock - Value) 2.80% / (0.73%)
Vanguard Mid Cap Index Institutional (Mid Cap Stock - Blend) 1.99% / (0.04%)
Eaton Vance Atlanta Capital SMID-Cap I (Mid Cap Stock - Growth) 3.10% (0.94%)
DFA US Targeted Value I (Small Cap Stock - Value) 2.95% / (0.37%)
PIMCO StocksPLUS Small Institutional (Small Cap Stock - Blend) 2.03% / (0.79%)
T. Rowe Price QM US Small-Cap Gr Eq I (Small Cap Stock - Growth) 3.14% / (0.66%)
PIMCO StocksPLUS Intl (USD-Hedged) Inst (International Stock - Blend) 11.78% / (0.84%)
American Funds Europacific Growth R6 (International Stock - Growth) 10.86% / (0.49%)
Here are the other investment options offered (and their expense ratios):
Fixed Income-Intermediate Bond:
PGIM Total Return Bond Z 0.52%
BbgBarc US Agg Bond TR USD N/A
Fixed Income- Multisector:
PIMCO Income Instl 0.74%
BbgBarc US Universal TR USD N/A
Retirement Income-Income Flex:
Prudential Day One IncomeFlex Target Balanced Fund 1.34%
Morningstar Lifetime Mod Incm TR USD N/A
Large Cap Stock- Value:
Invesco Diversified Dividend R5 0.54%
Russell 1000 Value TR USD N/A
Large Cap Stock- Blend:
iShares S&P 500 Index K 0.04%
Russell TR USD N/A
Large Cap Stock- Growth:
Fidelity Contrafund Commingled Pool 0.43%
Russell 1000 Growth TR USD N/A
Vanguard Growth Index Institutional 0.04%
Russell 1000 Growth TR USD N/A
Mid Cap Stock-Value:
PGIM QMA Mid-Cap Value R6 0.77%
Russell Mid Cap Value TR USD N/A
Mid Cap Stock- Blend:
Vanguard Mid Cap Index Institutional 0.04%
Russell Mid Cap TR USD N/A
Mid Cap Stock- Growth:
Eaton Vance Atlanta Capital SMID 0.94%
Russell Mid Cap Growth TR USD N/A
Small Cap Stock- Value:
DFA US Targeted Value 1 0.37%
Russell 2000 Value TR USD N/A
Small Cap Stock- Blend:
PIMCO StocksPLUS Small 0.79%
Russell 2000 TR USD N/A
Small Cap Stock- Growth:
T. Rowe Price QM US Small-Cap Gr 0.66%
Global Stock- Growth:
American Funds New Perspective R6 0.45%
International Stock- Blend:
PIMCO StocksPLUS Intl 0.84%
MSCI ACWI N/A
International Stock- Growth:
American Funds Europacific Growth R6 0.49%
Thank you so much for your help!
Re: 401k Options help (beginner)
You have way too many funds. Pick a handful of low cost index funds. You want to have a low expense ratio. The wiki page of this site is a good guide. Your ratio is good for your age.
https://www.bogleheads.org/wiki/Approxi ... ock_market
https://www.bogleheads.org/wiki/Approxi ... ock_market
Re: 401k Options help (beginner)
Yes, you don’t need so many funds. Any fund that makes up less than 5% of your portfolio isn’t going to have a measurable impact on your return.
I suggest that you read this short discussion about investing and try to replicate as best you can its recommendations, in terms of selecting funds:
https://www.etf.com/docs/IfYouCan.pdf
If you come back here and post your proposed selections, people will provide comments.
Good luck.
I suggest that you read this short discussion about investing and try to replicate as best you can its recommendations, in terms of selecting funds:
https://www.etf.com/docs/IfYouCan.pdf
If you come back here and post your proposed selections, people will provide comments.
Good luck.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: 401k Options help (beginner)
I’d use the ishares S&P 500 index for 60%, PGIM total return bond for 20%, and American Funds EuroPacific growth fund for 20%. Or something like that.
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Re: 401k Options help (beginner)
I don't see a good international fund in your 401k options so I'd use your roth IRA for international stock.
You can use the S&P 500 index fund (+/- the vanguard mid cap index fund) in your 401k for US stock funds. I didn't see a good small cap US index fund unless the russell 2000 fund is a small cap index fund, though I'm unsure what the ER is.
I'm not sure what to make of the lack of ER next to the "BbgBarc US Agg Bond TR USD N/A". Is this a treasury index fund or a US total bond index fund? I can't find it on google...
You can use the S&P 500 index fund (+/- the vanguard mid cap index fund) in your 401k for US stock funds. I didn't see a good small cap US index fund unless the russell 2000 fund is a small cap index fund, though I'm unsure what the ER is.
I'm not sure what to make of the lack of ER next to the "BbgBarc US Agg Bond TR USD N/A". Is this a treasury index fund or a US total bond index fund? I can't find it on google...
Re: 401k Options help (beginner)
What is the expense ratio for that option?Dindin13 wrote:I’ve recently decided to take a more active role with my 401k plan through my work after having been enrolled in the Goalmaker Plan through Prudential for the passed 5 years. Currently I’m in a “Conservative, 16+ year to retirement” plan.
You're better off in an individual fund than a target-date fund in the Roth IRA because you'll be in individual funds in your 401k.Also plan on opening a Roth IRA with Vanguard by the end of this year in which I'll invest $5500 towards a Vangaurd Target Retirement Fund 2050.
The best (least worst) options are:Here are the other investment options offered
- iShares S&P 500 Index 0.04% -- Large caps, 80% of US stocks
- Vanguard Mid Cap Index 0.04% -- Mid caps, 6% of US stocks
- DFA US Targeted Value 0.37% -- Small cap value, 7% of US stocks
- American Funds EuroPacific Growth 0.49% -- International stocks
- PGIM Total Return Bond 0.52% -- US bonds
- ruralavalon
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- Location: Illinois
Re: 401k Options help (beginner)
I agree. These are the better funds to use. That is a reasonable asset allocation in my opinion.Glockenspiel wrote: ↑Fri Oct 12, 2018 8:32 pm I’d use the ishares S&P 500 index for 60%, PGIM total return bond for 20%, and American Funds EuroPacific growth fund for 20%. Or something like that.
60%, iShares S&P 500 Index (81% of U.S. stock market) ER 0.04%
20%, American Funds EuroPacific Growth (both developed and emerging markets) ER 0.49%
20%, PGIM Total Return Bond ER 0.52%
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Keep it simple, using just a few broadly diversified funds with low expense ratios. For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as iShares S&P 500 Index in your 401k) is good enough by itself 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 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". 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 made little difference in performance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: 401k Options help (beginner)
ruralavalon wrote: ↑Sat Oct 13, 2018 8:08 amI agree. These are the better funds to use. That is a reasonable asset allocation in my opinion.Glockenspiel wrote: ↑Fri Oct 12, 2018 8:32 pm I’d use the ishares S&P 500 index for 60%, PGIM total return bond for 20%, and American Funds EuroPacific growth fund for 20%. Or something like that.
60%, iShares S&P 500 Index (81% of U.S. stock market) ER 0.04%
20%, American Funds EuroPacific Growth (both developed and emerging markets) ER 0.49%
20%, PGIM Total Return Bond ER 0.52%
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Keep it simple, using just a few broadly diversified funds with low expense ratios. For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as iShares S&P 500 Index in your 401k) is good enough by itself 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".
Understood. Do you think investing in just the iShares S&P 500 (Large Cap Blend) is sufficient alone or should I also consider investing in the Vanguard Growth Index Institutional (Large Cap Growth) just to have more diversification?
An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". 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 made little difference in performance.
Re: 401k Options help (beginner)
Living Free wrote: ↑Fri Oct 12, 2018 9:00 pm I don't see a good international fund in your 401k options so I'd use your roth IRA for international stock.
You can use the S&P 500 index fund (+/- the vanguard mid cap index fund) in your 401k for US stock funds. I didn't see a good small cap US index fund unless the russell 2000 fund is a small cap index fund, though I'm unsure what the ER is.
Yeah me either. I'll consider adding the Vanguard Mid Cap. You think I'll be ok without investing in small caps?
I'm not sure what to make of the lack of ER next to the "BbgBarc US Agg Bond TR USD N/A". Is this a treasury index fund or a US total bond index fund? I can't find it on google...
This was confusing for me as well. I didn't know what to make of it.
Re: 401k Options help (beginner)
Duckie wrote: ↑Fri Oct 12, 2018 9:34 pmWhat is the expense ratio for that option?Dindin13 wrote:I’ve recently decided to take a more active role with my 401k plan through my work after having been enrolled in the Goalmaker Plan through Prudential for the passed 5 years. Currently I’m in a “Conservative, 16+ year to retirement” plan.
The rep couldn't answer that as it was something like the average ER of all the funds she said. She said there was no additional 'fee' for using goalmaker (which is hard for me to believe).
You're better off in an individual fund than a target-date fund in the Roth IRA because you'll be in individual funds in your 401k.Also plan on opening a Roth IRA with Vanguard by the end of this year in which I'll invest $5500 towards a Vangaurd Target Retirement Fund 2050.
Eventually I want to turn that Vanguard Target Fund into another 3 Fund portfolio once I've accumulated enough money.
The best (least worst) options are:Here are the other investment options offeredI'd use just S&P 500 and Total Return Bond in this account. Put international in your Roth IRA.
- iShares S&P 500 Index 0.04% -- Large caps, 80% of US stocks
- Vanguard Mid Cap Index 0.04% -- Mid caps, 6% of US stocks
- DFA US Targeted Value 0.37% -- Small cap value, 7% of US stocks
- American Funds EuroPacific Growth 0.49% -- International stocks
- PGIM Total Return Bond 0.52% -- US bonds
Thank you for this, please take a look below at my proposed plan and let me know what you think.
Re: 401k Options help (beginner)
Thanks everyone for the feedback. I took a look at the wiki page “Approximating the Total Stock Market” and if I am trying to mimic the Vanguard Total Stock Market then I should have a blend of 24% Large Value, 24% Large Blend, 25% Large Growth, 6% Mid Value, 6% Mid Blend, 6% Mid Growth, 3% Small Value, 3% Small Blend, and 3% Small Growth.
The problem is that I don’t have the best options for some of these categories as some of the ERs seem high. My question then, is it better (safer) to have better representation across all fund sizes and class (despite the higer ERs) versus just having coverage in certain classes and not others. I’m sure there are pros and cons you guys can help me with.
Here are the 2 options I’ve come up with based on that info.
Option 1: More diversified, Higher ERs
US Stocks (70%)
24% iShares S&P 500 Index K (Large Blend) (0.04%)
25% Vanguard Growth Index Institutional (Large Growth) (0.04%)
24% Invesco Diversified Dividend R5 (Large Value) (0.54%)
6% Vanguard Mid Cap Index Institutional (Mid Blend) (0.04%)
6% Eaton Vance Capitol SMID (Mid Growth) (0.94%)
6% PGIM QMA Mid Cap Value R6 (Mid Value) (0.77%)
3% PIMCO Stocks PLUS Small Institutional (Small Blend) (0.79%)
3% T. Rowe Price QM US (Small Growth) (0.66%)
3% DFA US Targeted Value 1 (Small Value) (0.37%)
International Stocks (10%)
10% American Funds Europacific Growth R6 (International Growth) (0.49%)
Bonds (20%)
20% PGIM Total Return Bond Z (Intermediate Bond) (0.52%)
Option 2: Less Diversified, Lower ERs
US Stocks (70%)
36% iShares S&P 500 Index K (Large Blend) (0.04%)
37% Vanguard Growth Index Institutional (Large Growth) (0.04%)
18% Vanguard Mid Cap Index Institutional (Mid Blend) (0.04%)
9% DFA US Targeted Value 1 (Small Value) (0.37%)
International Stocks (10%)
10% American Funds Europacific Growth R6 (International Growth) (0.49%)
Bonds (20%)
20% PGIM Total Return Bond Z (Intermediate Bond) (0.52%)
I just worry with option 2 I’ll be susceptible to more losses if any 1 area gets hit too hard. But not sure.
Q. Are my AA acceptible at my age of 32? I’d like to be a little aggressive but within reason.
Q. What are any tax implications I should know about if I go forward and make these changes to my 401k? I don't want to get killed with taxes.
Q If I go forward with said allocations, that means I'll get rid of Goalmaker and I'll be responsible for rebalancing on my own (which I have no idea how to do). How hard is it?
Thank you
The problem is that I don’t have the best options for some of these categories as some of the ERs seem high. My question then, is it better (safer) to have better representation across all fund sizes and class (despite the higer ERs) versus just having coverage in certain classes and not others. I’m sure there are pros and cons you guys can help me with.
Here are the 2 options I’ve come up with based on that info.
Option 1: More diversified, Higher ERs
US Stocks (70%)
24% iShares S&P 500 Index K (Large Blend) (0.04%)
25% Vanguard Growth Index Institutional (Large Growth) (0.04%)
24% Invesco Diversified Dividend R5 (Large Value) (0.54%)
6% Vanguard Mid Cap Index Institutional (Mid Blend) (0.04%)
6% Eaton Vance Capitol SMID (Mid Growth) (0.94%)
6% PGIM QMA Mid Cap Value R6 (Mid Value) (0.77%)
3% PIMCO Stocks PLUS Small Institutional (Small Blend) (0.79%)
3% T. Rowe Price QM US (Small Growth) (0.66%)
3% DFA US Targeted Value 1 (Small Value) (0.37%)
International Stocks (10%)
10% American Funds Europacific Growth R6 (International Growth) (0.49%)
Bonds (20%)
20% PGIM Total Return Bond Z (Intermediate Bond) (0.52%)
Option 2: Less Diversified, Lower ERs
US Stocks (70%)
36% iShares S&P 500 Index K (Large Blend) (0.04%)
37% Vanguard Growth Index Institutional (Large Growth) (0.04%)
18% Vanguard Mid Cap Index Institutional (Mid Blend) (0.04%)
9% DFA US Targeted Value 1 (Small Value) (0.37%)
International Stocks (10%)
10% American Funds Europacific Growth R6 (International Growth) (0.49%)
Bonds (20%)
20% PGIM Total Return Bond Z (Intermediate Bond) (0.52%)
I just worry with option 2 I’ll be susceptible to more losses if any 1 area gets hit too hard. But not sure.
Q. Are my AA acceptible at my age of 32? I’d like to be a little aggressive but within reason.
Q. What are any tax implications I should know about if I go forward and make these changes to my 401k? I don't want to get killed with taxes.
Q If I go forward with said allocations, that means I'll get rid of Goalmaker and I'll be responsible for rebalancing on my own (which I have no idea how to do). How hard is it?
Thank you
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Re: 401k Options help (beginner)
You are way over complicating things. “Blend” funds include both value and growth stocks within them.
I would do 40% S&P 500, 20% DFA small value, 20% American Funds Europacific, 20% Total Return bond fund.
There are no tax implications of buying or selling within your 401k.
“Rebalancing” is easy, there should be a tool within your 401k to “re-allocate” your existing investments to the splits that you dictate. Do this once per year.
I would do 40% S&P 500, 20% DFA small value, 20% American Funds Europacific, 20% Total Return bond fund.
There are no tax implications of buying or selling within your 401k.
“Rebalancing” is easy, there should be a tool within your 401k to “re-allocate” your existing investments to the splits that you dictate. Do this once per year.
Re: 401k Options help (beginner)
I would ignore that table.Dindin13 wrote:I took a look at the wiki page “Approximating the Total Stock Market” and if I am trying to mimic the Vanguard Total Stock Market then I should have a blend of 24% Large Value, 24% Large Blend, 25% Large Growth, 6% Mid Value, 6% Mid Blend, 6% Mid Growth, 3% Small Value, 3% Small Blend, and 3% Small Growth.
Having more funds doesn't make a portfolio more diversified. It just makes it more complicated. If you insist on putting international in the 401k (it would be better in the Roth IRA) then I see two reasonable possibilities:Option 1: More diversified, Higher ERs
<snip>
Option 2: Less Diversified, Lower ERs
- 401k -- 100%
70% iShares S&P 500 Index (0.04%)
10% American Funds EuroPacific Growth (0.49%)
20% PGIM Total Return Bond (0.52%)
or
401k -- 100%
55% iShares S&P 500 Index (0.04%)
15% DFA US Targeted Value (0.37%)
10% American Funds EuroPacific Growth (0.49%)
20% PGIM Total Return Bond (0.52%)
Both bonds and international stocks are a little low, but they're acceptable.Are my AA acceptible at my age of 32? I’d like to be a little aggressive but within reason.
There are no tax issues swapping things inside the 401k.What are any tax implications I should know about if I go forward and make these changes to my 401k? I don't want to get killed with taxes.
It takes a calculator and about 10 minutes once or twice a year if you do it manually. The more accounts, the longer.If I go forward with said allocations, that means I'll get rid of Goalmaker and I'll be responsible for rebalancing on my own (which I have no idea how to do). How hard is it?
Re: 401k Options help (beginner)
HEDGEFUNDIE wrote: ↑Sat Oct 13, 2018 4:57 pm You are way over complicating things. “Blend” funds include both value and growth stocks within them.
Ok still new to this, but that makes sense.
I would do 40% S&P 500, 20% DFA small value, 20% American Funds Europacific, 20% Total Return bond fund.
Now help me understand...why would you choose the DFA small value versus say the Vanguard Mid Cap which 0.04 ER and less volatility?
There are no tax implications of buying or selling within your 401k.
Ok Great
“Rebalancing” is easy, there should be a tool within your 401k to “re-allocate” your existing investments to the splits that you dictate. Do this once per year.
awesome
Re: 401k Options help (beginner)
Duckie wrote: ↑Sat Oct 13, 2018 5:00 pmI would ignore that table.Dindin13 wrote:I took a look at the wiki page “Approximating the Total Stock Market” and if I am trying to mimic the Vanguard Total Stock Market then I should have a blend of 24% Large Value, 24% Large Blend, 25% Large Growth, 6% Mid Value, 6% Mid Blend, 6% Mid Growth, 3% Small Value, 3% Small Blend, and 3% Small Growth.
Why?
Having more funds doesn't make a portfolio more diversified. It just makes it more complicated. If you insist on putting international in the 401k (it would be better in the Roth IRA) then I see two reasonable possibilities:Option 1: More diversified, Higher ERs
<snip>
Option 2: Less Diversified, Lower ERs
- 401k -- 100%
70% iShares S&P 500 Index (0.04%)
10% American Funds EuroPacific Growth (0.49%)
20% PGIM Total Return Bond (0.52%)
or
401k -- 100%
55% iShares S&P 500 Index (0.04%)
15% DFA US Targeted Value (0.37%)
10% American Funds EuroPacific Growth (0.49%)
20% PGIM Total Return Bond (0.52%)
I like those options. But is there any reason why you chose the DFA US Targeted Value when there's a Vanguard Mid Cap Index Institutional option with lower ER and less volatility?
Both bonds and international stocks are a little low, but they're acceptable.Are my AA acceptible at my age of 32? I’d like to be a little aggressive but within reason.
There are no tax issues swapping things inside the 401k.What are any tax implications I should know about if I go forward and make these changes to my 401k? I don't want to get killed with taxes.
Good to know thank u
It takes a calculator and about 10 minutes once or twice a year if you do it manually. The more accounts, the longer.If I go forward with said allocations, that means I'll get rid of Goalmaker and I'll be responsible for rebalancing on my own (which I have no idea how to do). How hard is it?
sounds good
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Re: 401k Options help (beginner)
There is academic research that shows a “small cap value” premium, which should more than outweigh the higher ER of the DFA fund. Many here on BH believe this research and therefore tilt more heavily to SCV.Dindin13 wrote: ↑Sat Oct 13, 2018 5:38 pmHEDGEFUNDIE wrote: ↑Sat Oct 13, 2018 4:57 pm You are way over complicating things. “Blend” funds include both value and growth stocks within them.
Ok still new to this, but that makes sense.
I would do 40% S&P 500, 20% DFA small value, 20% American Funds Europacific, 20% Total Return bond fund.
Now help me understand...why would you choose the DFA small value versus say the Vanguard Mid Cap which 0.04 ER and less volatility?
There are no tax implications of buying or selling within your 401k.
Ok Great
“Rebalancing” is easy, there should be a tool within your 401k to “re-allocate” your existing investments to the splits that you dictate. Do this once per year.
awesome
Here is a comparison of historical performance between the two funds (no guarantees that it will continue in the future):
https://www.portfoliovisualizer.com/fun ... F12%2F2018
Re: 401k Options help (beginner)
It doesn't mean that you need 73% large caps, 18% mid caps, and 9% small caps when it comes to mixing funds. Instead you try to replicate the style box. For example, I got the following percentages from the free Morningstar Instant X-Ray "Stock Style Diversification/Valuation" box as of 4/18/17:Dindin13 wrote:Why?Duckie wrote:I would ignore that table.Dindin13 wrote:I took a look at the wiki page “Approximating the Total Stock Market” and if I am trying to mimic the Vanguard Total Stock Market then I should have a blend of 24% Large Value, 24% Large Blend, 25% Large Growth, 6% Mid Value, 6% Mid Blend, 6% Mid Growth, 3% Small Value, 3% Small Blend, and 3% Small Growth.
- 100% VTSMX shows:
- 24 24 24
06 06 07
03 03 03
- 24 23 23
07 08 07
03 03 03
- 24 24 24
Small cap value has had a premium for years. See here.I like those options. But is there any reason why you chose the DFA US Targeted Value when there's a Vanguard Mid Cap Index Institutional option with lower ER and less volatility?
Re: 401k Options help (beginner)
Duckie wrote: ↑Sat Oct 13, 2018 6:26 pmIt doesn't mean that you need 73% large caps, 18% mid caps, and 9% small caps when it comes to mixing funds. Instead you try to replicate the style box. For example, I got the following percentages from the free Morningstar Instant X-Ray "Stock Style Diversification/Valuation" box as of 4/18/17:Dindin13 wrote:Why?Duckie wrote:I would ignore that table.Dindin13 wrote:I took a look at the wiki page “Approximating the Total Stock Market” and if I am trying to mimic the Vanguard Total Stock Market then I should have a blend of 24% Large Value, 24% Large Blend, 25% Large Growth, 6% Mid Value, 6% Mid Blend, 6% Mid Growth, 3% Small Value, 3% Small Blend, and 3% Small Growth.I tweaked the three funds' percentages until they came close to VTSMX. These numbers shift constantly. Close enough is good enough.
- 100% VTSMX shows:
80% VFINX, 6% VIMSX, 14% NAESX shows:
- 24 24 24
06 06 07
03 03 03
- 24 23 23
07 08 07
03 03 03
Ok now I think I'm confused. I tried doing something similar with my Option 1 plan but you said to ignore that table and just do 3 funds. And now you just told me to do another similar table thing but with slightly different numbers from my original plan. Please explain.
Small cap value has had a premium for years. See here.I like those options. But is there any reason why you chose the DFA US Targeted Value when there's a Vanguard Mid Cap Index Institutional option with lower ER and less volatility?
Ok didn't know that
- ruralavalon
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Re: 401k Options help (beginner)
In my opinion iShares 500 Index Fund is sufficient by itself for domestic stocks. I don't think that adding Vanguard Growth Index Fund adds much if any diversification. Both invest in Facebook, Apple, Amazon, Microsoft, and Google as their largest holdings. The Growth fund invests in stocks of fewer companies. Adding another fund does not necessarily add diversification.Dindin13 wrote: ↑Sat Oct 13, 2018 4:27 pmruralavalon wrote: ↑Sat Oct 13, 2018 8:08 amI agree. These are the better funds to use. That is a reasonable asset allocation in my opinion.Glockenspiel wrote: ↑Fri Oct 12, 2018 8:32 pm I’d use the ishares S&P 500 index for 60%, PGIM total return bond for 20%, and American Funds EuroPacific growth fund for 20%. Or something like that.
60%, iShares S&P 500 Index (81% of U.S. stock market) ER 0.04%
20%, American Funds EuroPacific Growth (both developed and emerging markets) ER 0.49%
20%, PGIM Total Return Bond ER 0.52%
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Keep it simple, using just a few broadly diversified funds with low expense ratios. For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as iShares S&P 500 Index in your 401k) is good enough by itself 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".
Understood. Do you think investing in just the iShares S&P 500 (Large Cap Blend) is sufficient alone or should I also consider investing in the Vanguard Growth Index Institutional (Large Cap Growth) just to have more diversification?
An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". 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 made little difference in performance.
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