Help picking husband's 401k investments

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Topic Author
xwafflesx
Posts: 20
Joined: Tue Dec 19, 2017 8:36 pm

Help picking husband's 401k investments

Post by xwafflesx » Tue Jan 08, 2019 8:55 pm

Hi everyone,

I am looking for some advice on changing my husband's 401k investments. He currently has it mostly invested in TRP (T. Rowe Price) Balanced Fund and a smaller amount in T Rowe Price Target Retirement. Asset Allocation currently is:
63.6 stocks
33.4 bonds
Money Market/Stable Value 2.5
Other .5

He has recently asked for my help (yay for JL Collins SImple Path to Wealth book I bought him that he is loving) and would like to change his investments. He would like to have a 75/25 AA as well. The following are the Vanguard options he has access to:

Vanguard Dev Mrkts Index Inst Plus (VDIPX) 0.05%
Vanguard Emerging Mrkts Stk Index Inst
Vanguard High Div Yld Index
Vanguard Institutional Index Plus (VIIX) 0.02%
Vanguard Mid-Cap Index Inst Plus (VMCPX) 0.03%
Vanguard Small-Cap Index Inst (VMCPX) 0.03%
TRP Balanced Fund (RPBAX) 0.64%
TRP Growth Stock Fund (PRGFX) 0.67%


I currently invest with Vanguard but have never had a job with a 401k option so I have my own Vanguard account with holdings in VTSAX, VTIVX and VFIAX. So I am new to these options but am thinking that his best bet is VIIX (Vanguard Inst Index Plus in his listing) and VSCIX (Vanguard Small-Cap Index Inst). Given the above options would this be his best options?

His bond options are:
Vanguard Interm Term Bond Index (VBIIX) 0.15%
Vanguard Shrt Term Bond Index Admiral (VBIRX) 0.07%
WIlmington Broad Mrkt Bond
Wilmington Interm-Term Bond
Wilmington Short-Term Bond

I am lost on the bonds for advice as my bonds come from my Target Retirement. I read the description of each on Vanguard's site but unsure what to recommend. Please let me know what other information you may need to help. Thanks!
Last edited by xwafflesx on Wed Jan 09, 2019 7:54 pm, edited 5 times in total.

Olemiss540
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Joined: Fri Aug 18, 2017 8:46 pm

Re: Help picking husband's 401k investments

Post by Olemiss540 » Tue Jan 08, 2019 10:32 pm

Looks like great options! Personally, I would simplify to a 3 fund portfolio consisting of:

Vanguard Dev Mrkts Index Inst Plus
Vanguard Institutional Index Plus
Vanguard Inter Term Bond

The Institutional Index Plus should very closely mirror the Total Stock market index and the Dev Mrkts Index appears to handle foreign market coverage. Inter Term bond fund should be approximately 6-7 year average duration with a very diverse spread of credit risk and durations to ensure it tracks the average bond market.

These will give you plenty of diversity, simplicity and EXTREMELY low costs and should return better than 80% or so of portfolios due to that reason. Keep It SimpleS!

Anything between 20% to 40% of overall equity holdings being non-US is recommended. I usually split the difference and go with a 70/30 US/foreign equity split for the two equity index funds. His AA seems fine at 75/25 stocks/bonds as well.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
xwafflesx
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Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 7:51 am

Thanks for your input. The goal is definitely a simple 3-fund portfolio. Can you or anyone else explain the Vanguard
Dev Mrkts Index Inst Plus (VDIPX)? I see that it gets us the International exposure but it looks like a horrible performance when I look at it under annually since inception at 2014 or google VDIPX.
This is the link I am looking at:
https://institutional.vanguard.com/VGAp ... undId=1457

Thanks again.

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CyclingDuo
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Re: Help picking husband's 401k investments

Post by CyclingDuo » Wed Jan 09, 2019 8:24 am

xwafflesx wrote:
Tue Jan 08, 2019 8:55 pm
Vanguard Institutional Index Plus
Vanguard Mid-Cap Index Inst Plus
Vanguard Small-Cap Index Inst
At least with those three choices for US Domestic he has available, you can approximate the Total Stock Market Fund for the US Domestic portion of the Three Fund Portfolio either using two of them or all three of them. Instructions are here: https://www.bogleheads.org/wiki/Approxi ... ock_market

81% Vanguard Institutional Index Fund
4% Vanguard Mid-Cap Index Fund
15% Vanguard Small-Cap Index Fund

82% Vanguard Institutional Index Fund
18% Vanguard Small-Cap Index Fund

As to the bond portion, have you checked the Three Fund Portfolio wiki page:

https://www.bogleheads.org/wiki/Three-fund_portfolio

You mentioned T. Rowe Price. Is this fund available?

US Bond Enhanced Index Fund (PBDIX)

Developed Markets Index Fund Institutional Plus Shares (VDIPX) is a relatively new fund that began in 2014. It will satisfy the Total International portion of the Three Fund Portfolio. The performance of it captures the bear market of 2015-16 as well as the current bear market in international equities. Thus, it is understandable that the fund only measures a rather difficult 4 years for international equities.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

samsdad
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Re: Help picking husband's 401k investments

Post by samsdad » Wed Jan 09, 2019 8:40 am

xwafflesx wrote:
Wed Jan 09, 2019 7:51 am
Thanks for your input. The goal is definitely a simple 3-fund portfolio. Can you or anyone else explain the Vanguard
Dev Mrkts Index Inst Plus (VDIPX)? I see that it gets us the International exposure but it looks like a horrible performance when I look at it under annually since inception at 2014 or google VDIPX.
This is the link I am looking at:
https://institutional.vanguard.com/VGAp ... undId=1457

Thanks again.
International has underperformed relative to US. Depending on who you ask and what they’re looking at, it has underperformed for nearly 40 years.

My suggestion is to read about international here a lot before committing to it. There’s no surer way to lock in loses than jumping on a horse only to abandon it down the road because you’ve given up on it due to underperformance relative to, for example, your US allocation. If you don’t mind the potential performance drag because you’re sold on some “diversification” principle that you’re going to read about, then you should hold it.

But note that if you’re buying it because you’re expecting it to zig when your US zags, you might be sorely disappointed. International basically has a .90 correlation with US lately (or close thereto). In other words, they tend to fly in formation, albeit one a lot lower than the other. Diversification doesn’t mean one goes up when the other goes down all the time.

Disclosure: I don’t do international because I don’t believe in the product. I don’t think the “benefits” outweigh its risks. YMMV.

EDIT: The VDIPX fund has a .81 correlation.https://www.portfoliovisualizer.com/bac ... ion2_2=100
EDIT 2: VGTSX, Vanguard’s total international stock investor shares had a .85 correlation to the US market if you look back to May 1996https://www.portfoliovisualizer.com/bac ... ion3_3=100 Compared to the S&P 500, $10k invested then in the international fund would have earned you half of what you’d have earned in the 500. The future of course may be different.
Last edited by samsdad on Wed Jan 09, 2019 9:48 am, edited 2 times in total.

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Toons
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Location: Hills of Tennessee

Re: Help picking husband's 401k investments

Post by Toons » Wed Jan 09, 2019 9:19 am

I would be satisfied with
Vanguard Institutional Index Plus.
Period.
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Topic Author
xwafflesx
Posts: 20
Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 11:09 am

CyclingDuo wrote:
Wed Jan 09, 2019 8:24 am

You mentioned T. Rowe Price. Is this fund available?

US Bond Enhanced Index Fund (PBDIX)

Developed Markets Index Fund Institutional Plus Shares (VDIPX) is a relatively new fund that began in 2014. It will satisfy the Total International portion of the Three Fund Portfolio. The performance of it captures the bear market of 2015-16 as well as the current bear market in international equities. Thus, it is understandable that the fund only measures a rather difficult 4 years for international equities.
Thank you for those links. I will get busy reading them.

His bond options are limited to just the Vanguard ones listed above and:
WIlmington Broad Mrkt Bond
Wilmington Interm-Term Bond
Wilmington Short-Term Bond

Topic Author
xwafflesx
Posts: 20
Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 11:12 am

samsdad wrote:
Wed Jan 09, 2019 8:40 am

My suggestion is to read about international here a lot before committing to it. There’s no surer way to lock in loses than jumping on a horse only to abandon it down the road because you’ve given up on it due to under performance relative to, for example, your US allocation. If you don’t mind the potential performance drag because you’re sold on some “diversification” principle that you’re going to read about, then you should hold it.

But note that if you’re buying it because you’re expecting it to zig when your US zags, you might be sorely disappointed. International basically has a .90 correlation with US lately (or close thereto). In other words, they tend to fly in formation, albeit one a lot lower than the other. Diversification doesn’t mean one goes up when the other goes down all the time.

Disclosure: I don’t do international because I don’t believe in the product. I don’t think the “benefits” outweigh its risks. YMMV.
Compared to the S&P 500, $10k invested then in the international fund would have earned you half of what you’d have earned in the 500. The future of course may be different.
Thank you for your input. It goes along with my hunch that I am not yet sold on the International Fund he has available to him. Something we'll think about before committing anything.

Topic Author
xwafflesx
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Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 12:13 pm

CyclingDuo wrote:
Wed Jan 09, 2019 8:24 am
xwafflesx wrote:
Tue Jan 08, 2019 8:55 pm
Vanguard Institutional Index Plus
Vanguard Mid-Cap Index Inst Plus
Vanguard Small-Cap Index Inst
At least with those three choices for US Domestic he has available, you can approximate the Total Stock Market Fund for the US Domestic portion of the Three Fund Portfolio either using two of them or all three of them. Instructions are here: https://www.bogleheads.org/wiki/Approxi ... ock_market

81% Vanguard Institutional Index Fund
4% Vanguard Mid-Cap Index Fund
15% Vanguard Small-Cap Index Fund

82% Vanguard Institutional Index Fund
18% Vanguard Small-Cap Index Fund

Developed Markets Index Fund Institutional Plus Shares (VDIPX) is a relatively new fund that began in 2014. It will satisfy the Total International portion of the Three Fund Portfolio. The performance of it captures the bear market of 2015-16 as well as the current bear market in international equities. Thus, it is understandable that the fund only measures a rather difficult 4 years for international equities.
So I have read the 3-fund Portfolio link in the past but it does not seem like he has anything that would mimic the Vanguard Total International. When I originally made the post I was thinking to just forget it for now.
His stock choices are just the Vanguard ones listed above with the Dev Mrkts Index as the only one tracking International (besides Emerging Mrkts which is too risky for us). Otherwise it is just the TRP Balance Fund which he has and has not performed well and the TRP Growth Stock Fund which is 92 domestic and 6.2 foreign stock.

Any other thoughts on International? I am thinking we should just do:
82% Vanguard Institutional Index Fund
18% Vanguard Small-Cap Index Fund

For bonds:
Vanguard Inter Term Bond

snailderby
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Re: Help picking husband's 401k investments

Post by snailderby » Wed Jan 09, 2019 2:58 pm

xwafflesx wrote:
Wed Jan 09, 2019 12:13 pm
Any other thoughts on International?
samsdad wrote:
Wed Jan 09, 2019 8:40 am
My suggestion is to read about international here a lot before committing to it.
+1.

If you have the time, I found these two threads helpful:

www.bogleheads.org/forum/viewtopic.php?t=196956; and
www.bogleheads.org/forum/viewtopic.php?t=256423.

Siamond also wrote a great series on international investing at:

www.finpage.blog/2017/03/18/investing-i ... ld-part-1/;
www.finpage.blog/2017/03/25/investing-i ... ld-part-2/; and
www.finpage.blog/2017/03/25/investing-i ... ld-part-3/.

And Vanguard has a whitepaper on international diversification that is available at https://personal.vanguard.com/pdf/icriecr.pdf.

infotrader
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Joined: Tue Feb 28, 2017 2:39 pm

Re: Help picking husband's 401k investments

Post by infotrader » Wed Jan 09, 2019 3:05 pm

"The rest of the options are all with T. Rowe Price."

I wonder what the T.R. Price options.
I think BHers pay too much attention to ER, and miss some good investment options.

rkhusky
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Re: Help picking husband's 401k investments

Post by rkhusky » Wed Jan 09, 2019 3:07 pm

infotrader wrote:
Wed Jan 09, 2019 3:05 pm
"The rest of the options are all with T. Rowe Price."

I wonder what the T.R. Price options.
I think BHers pay too much attention to ER, and miss some good investment options.
The OP didn't list ER's for the funds, so it isn't even clear if the Vanguard choices are lower cost.

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ruralavalon
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Location: Illinois

Re: Help picking husband's 401k investments

Post by ruralavalon » Wed Jan 09, 2019 6:31 pm

xwafflesx wrote:
Tue Jan 08, 2019 8:55 pm
Hi everyone,

I am looking for some advice on changing my husband's 401k investments. He currently has it mostly invested in TRP (T. Rowe Price) Balanced Fund and a smaller amount in T Rowe Price Target Retirement. Asset Allocation currently is:
63.6 stocks
33.4 bonds
Money Market/Stable Value 2.5
Other .5

He has recently asked for my help (yay for JL Collins SImple Path to Wealth book I bought him that he is loving) and would like to change his investments. He would like to have a 75/25 AA as well. The following are the Vanguard options he has access to:

Vanguard Dev Mrkts Index Inst Plus
Vanguard Emerging Mrkts Stk Index Inst
Vanguard High Div Yld Index
Vanguard Institutional Index Plus
Vanguard Mid-Cap Index Inst Plus
Vanguard Small-Cap Index Inst

The rest of the options are all with T. Rowe Price.

I currently invest with Vanguard but have never had a job with a 401k option so I have my own Vanguard account with holdings in VTSAX, VTIVX and VFIAX. So I am new to these options but am thinking that his best bet is VIIX (Vanguard Inst Index Plus in his listing) and VSCIX (Vanguard Small-Cap Index Inst). Given the above options would this be his best options?

His bond options are:
Vanguard Interm Term Bond Index
Vanguard Shrt Term Bond Index Admiral

I am lost on the bonds for advice as my bonds come from my Target Retirement. I read the description of each on Vanguard's site but unsure what to recommend. Please let me know what other information you may need to help. Thanks!
It will help a lot if you list all funds offered, in his 401k, and in addition to the fund names also give the ticker symbols and expense ratios. The expense ratio is a prime factor in selecting funds to use.

You can 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.

Based on what the information provided so far the better funds to use are:
Vanguard Institutional Index Plus (an S&P 500 index fund);
Vanguard Developed Markets Institutional Index Plus; and
Vanguard Intermediate-term Bond Index.

A S&P 500 index fund is fine by itself for investing in domestic stocks. 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. In the 26 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
xwafflesx
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Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 7:36 pm

ruralavalon wrote:
Wed Jan 09, 2019 6:31 pm

It will help a lot if you list all funds offered, in his 401k, and in addition to the fund names also give the ticker symbols and expense ratios. The expense ratio is a prime factor in selecting funds to use.

You can 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.

Based on what the information provided so far the better funds to use are:
Vanguard Institutional Index Plus (an S&P 500 index fund);
Vanguard Developed Markets Institutional Index Plus; and
Vanguard Intermediate-term Bond Index.

A S&P 500 index fund is fine by itself for investing in domestic stocks. 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. In the 26 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical.
I just updated it to show all of his options, ticker symbols and ER's. I had to do it manually though by searching google since the screenshot he sent doesn't list that information.

Topic Author
xwafflesx
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Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 7:38 pm

infotrader wrote:
Wed Jan 09, 2019 3:05 pm
"The rest of the options are all with T. Rowe Price."

I wonder what the T.R. Price options.
I think BHers pay too much attention to ER, and miss some good investment options.
The TR Price options are listed. There are just the two and the ER's appear to be much higher.

Topic Author
xwafflesx
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Joined: Tue Dec 19, 2017 8:36 pm

Re: Help picking husband's 401k investments

Post by xwafflesx » Wed Jan 09, 2019 7:46 pm

snailderby wrote:
Wed Jan 09, 2019 2:58 pm

If you have the time, I found these two threads helpful:

www.bogleheads.org/forum/viewtopic.php?t=196956; and
www.bogleheads.org/forum/viewtopic.php?t=256423.

Siamond also wrote a great series on international investing at:

www.finpage.blog/2017/03/18/investing-i ... ld-part-1/;
www.finpage.blog/2017/03/25/investing-i ... ld-part-2/; and
www.finpage.blog/2017/03/25/investing-i ... ld-part-3/.

And Vanguard has a whitepaper on international diversification that is available at https://personal.vanguard.com/pdf/icriecr.pdf.
Thank you for those links. Currently have read a chunk of the first two threads and I think I have a grasp on what we want to do. I don't think I have ever clicked on an International Yes/No thread here as it never related to me before. I had no idea there were a lot of past discussions back and forth on the topic.

workerbeeengineer
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Re: Help picking husband's 401k investments

Post by workerbeeengineer » Thu Jan 10, 2019 9:02 am

xwafflesx, One thing I don't see mentioned, but perhaps I overlooked it or it's discussed in the links provided in various responses...I would suggest coming at this from a combined portfolio perspective rather than his and your portfolios in isolation. Decide on your risk tolerance and asset allocation for the joint portfolio. See how close your current joint portfolio meets that desired joint AA. Fund choices for husband's 401k should move the joint portfolio closer to that target AA.

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ruralavalon
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Location: Illinois

Re: Help picking husband's 401k investments

Post by ruralavalon » Thu Jan 10, 2019 12:42 pm

Asset allocation.
You indicated a preference for a 75/25 asset allocation.

I suggest around 20-30% of stocks in international stocks.

That works out to about 25% bonds, 20% international stocks, and 55% domestic stocks. Asset allocation is a very personal decision, which he must make based on his own ability, willingness and need to take risk.


Fund selection.
With the new information I still believe the better funds to use in his 401k are:
1) 55%, Vanguard Institutional Index Plus (a S&P 500 index fund) (VIIIX) ER 0.02%;
2) 20%, Vanguard Developed Markets Institutional Index Plus (VDIPX) ER 0.06%; and
3) 25%, Vanguard Intermediate-term Bond Index Fund Investor Shares (VBIIX) ER 0.15%.

A S&P 500 index fund (like Vanguard Institutional Index Fund Institutional Plus in his 401k) is good enough by itself for investing in domestic stocks. A 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. In the 26 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical.

. . . . .

I suggest that you and he read one or two good books on general investing. Please see the wiki article "Books: Recommendations and Reviews".

If you have any questions, just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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