New Job 401k Options allocation help!

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Topic Author
junm
Posts: 6
Joined: Thu Mar 14, 2019 8:49 pm

New Job 401k Options allocation help!

Post by junm » Thu Mar 14, 2019 8:51 pm

Hello all, I have started a new job 2 years ago and I would like to finally take a chance to rebalance my portfolio.

I am currently 23 years old and am maxing out at 19000 a year.

I was looking at 80/20 stocks/bonds or 85/15.

These are the options I have.

What do you guys think would be the best option (with fee and everything considered)?

Thanks!

Current retirement assets

Emergency funds: 10,000
Debt: 0
Tax Filing Status: Married Filling Jointly
Company match: Up to 6% of income, 50% match
401k contribution: Enough % to Max out within a year (19000)
State of Residence: MA
Age: 23
Desired Asset allocation: 85% stocks / 15% bonds
Desired International allocation: 30% of stocks
401k Portfolio Size: 23k
Roth IRA Portfolio Size: 11k
Other Portfolio Size: 0



401k Fund options:

FID 500 INDEX (FXAIX)
02/17/1988
Stock Investments Large Cap 0.015% No additional fees apply.
FID BLUE CHIP GR K (FBGKX)
12/31/1987
Stock Investments Large Cap 0.62% No additional fees apply.
FID CONTRAFUND K (FCNKX)
05/17/1967
Stock Investments Large Cap 0.73% No additional fees apply.
MFS VALUE R6 (MEIKX)
01/02/1996
Stock Investments Large Cap 0.48% No additional fees apply.
CRLN E MID CAP GR R6 (HRAUX)
08/20/1998
Stock Investments Mid-Cap 0.66% No additional fees apply.
FID EXTD MKT IDX (FSMAX)
11/05/1997
Stock Investments Mid-Cap 0.045% No additional fees apply.
VANG SELECTED VALUE (VASVX)
02/15/1996
Stock Investments Mid-Cap 0.36% No additional fees apply.
CONESTOGA SM CAP IS (CCALX)
10/01/2002
Stock Investments Small Cap 0.99% No additional fees apply.
DFA US SMALL CAP I (DFSTX)
03/19/1992
Stock Investments Small Cap 0.37% No additional fees apply.
GS SM CAP VALUE INST (GSSIX)
10/22/1992
Stock Investments Small Cap 0.97% No additional fees apply.
AF EUROPAC GROWTH R6 (RERGX)
04/16/1984
Stock Investments International 0.49% No additional fees apply.
DFA EMRG MKT CORE EQ (DFCEX)
04/05/2005
Stock Investments International 0.52% No additional fees apply.
FID INTL INDEX (FSPSX)
11/05/1997
Stock Investments International 0.045% No additional fees apply.
C&S INST REALTY SHS (CSRIX)
02/14/2000
Stock Investments Specialty 0.77% No additional fees apply.
FID FREEDOM 2005 K (FSNJX)
11/06/2003
Blended Investment* N/A 0.43% No additional fees apply.
FID FREEDOM 2010 K (FSNKX)
10/17/1996
Blended Investment* N/A 0.46% No additional fees apply.
FID FREEDOM 2015 K (FSNLX)
11/06/2003
Blended Investment* N/A 0.5% No additional fees apply.
FID FREEDOM 2020 K (FSNOX)
10/17/1996
Blended Investment* N/A 0.54% No additional fees apply.
FID FREEDOM 2025 K (FSNPX)
11/06/2003
Blended Investment* N/A 0.57% No additional fees apply.
FID FREEDOM 2030 K (FSNQX)
10/17/1996
Blended Investment* N/A 0.61% No additional fees apply.
FID FREEDOM 2035 K (FSNUX)
11/06/2003
Blended Investment* N/A 0.64% No additional fees apply.
FID FREEDOM 2040 K (FSNVX)
09/06/2000
Blended Investment* N/A 0.65% No additional fees apply.
FID FREEDOM 2045 K (FSNZX)
06/01/2006
Blended Investment* N/A 0.65% No additional fees apply.
FID FREEDOM 2050 K (FNSBX)
06/01/2006
Blended Investment* N/A 0.65% No additional fees apply.
FID FREEDOM 2055 K (FNSDX)
06/01/2011
Blended Investment* N/A 0.65% No additional fees apply.
FID FREEDOM 2060 K (FNSFX)
08/05/2014
Blended Investment* N/A 0.65% No additional fees apply.
FID FREEDOM INC K (FNSHX)
10/17/1996
Blended Investment* N/A 0.42% No additional fees apply.
NYL ANCHOR ACCOUNT

Bond Investments Stable Value 0.35% No additional fees apply.
FID TOTAL BOND (FTBFX)
10/15/2002
Bond Investments Income 0.45% No additional fees apply.
MS MK HY CORP BD R6 (MHYSX)
05/01/1986
Bond Investments Income 0.58% No additional fees apply.
VANG TOT BD MKT ADM (VBTLX)
12/11/1986
Bond Investments Income 0.05% No additional fees apply.
VANG VMMR-FED MMKT (VMFXX)
07/13/1981
7 day yield as of
02/28/2019 2.34%
Short-Term Investments N/A 0.11% No additional fees apply.
Last edited by junm on Thu Mar 14, 2019 9:56 pm, edited 1 time in total.

EHEngineer
Posts: 743
Joined: Sat Feb 28, 2015 4:35 pm

Re: New Job 401k Options allocation help!

Post by EHEngineer » Thu Mar 14, 2019 9:32 pm

Hi junm,

Welcome to Bogleheads! You are fortunate to have a very good 401k.

Here are the funds I like. If you want more specifics, you can try updating your post in the standard format:
viewtopic.php?t=6212

Best,
Ehen

US Stocks
Investments you currently own FID 500 INDEX (FXAIX)
02/17/1988
Stock Investments Large Cap 0.015% No additional fees apply.

International Stocks
Investments you currently own FID INTL INDEX (FSPSX)
11/05/1997
Stock Investments International 0.045% No additional fees apply.

Bonds
VANG TOT BD MKT ADM (VBTLX)
12/11/1986
Bond Investments Income 0.05% No additional fees apply.

Cash
VANG VMMR-FED MMKT (VMFXX)
07/13/1981
7 day yield as of
02/28/2019 2.34%
Short-Term Investments N/A 0.11% No additional fees apply.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

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mhadden1
Posts: 590
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Location: North Alabama

Re: New Job 401k Options allocation help!

Post by mhadden1 » Thu Mar 14, 2019 9:56 pm

Congratulations on having inexpensive suitable choices. I would use the funds below:

FID 500 INDEX (FXAIX) 0.015%
Mainstay US large caps fund.

FID EXTD MKT IDX (FSMAX) 0.045%
If you want to add an extra mid/small cap fund to approximate total US stock market, use a ration of about 80% FSAIX/20% FSMAX. Doing this will likely make negligible difference to returns. Might say more about your personality than your investing chops. I did this when I had no 401k access to a total stock market fund.

FID INTL INDEX (FSPSX) 0.045%
Mainstay international fund - I would hold between 20-45% of stocks.

VANG TOT BD MKT ADM (VBTLX) 0.05%
Mainstay bond fund - at age 23 I would hold between 0-20% of total

One note about your choices - most people agree that the DFA funds are very good, and some think they are worth the somewhat higher expense ratios. They are generally only available through advisers (or some 401k plans, like yours.) I guess I am agnostic about DFA. Something to think about.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

Topic Author
junm
Posts: 6
Joined: Thu Mar 14, 2019 8:49 pm

Re: New Job 401k Options allocation help!

Post by junm » Thu Mar 14, 2019 9:57 pm

I have updated my post !

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smarcus3
Posts: 244
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Location: USA

Re: New Job 401k Options allocation help!

Post by smarcus3 » Thu Mar 14, 2019 10:22 pm

Since you want a mix of equities and bonds why not choose a Target date fund ?

If you want more control fidelity total bond fund, the lowest cost fee large mid and small funds. Plus an international.
This is my personal opinion. I'm an engineer not a financial advisor.

Topic Author
junm
Posts: 6
Joined: Thu Mar 14, 2019 8:49 pm

Re: New Job 401k Options allocation help!

Post by junm » Thu Mar 14, 2019 10:27 pm

smarcus3 wrote:
Thu Mar 14, 2019 10:22 pm
Since you want a mix of equities and bonds why not choose a Target date fund ?

If you want more control fidelity total bond fund, the lowest cost fee large mid and small funds. Plus an international.
Target date fund's fees are 0.65% which I thought was high. What are your thoughts?

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smarcus3
Posts: 244
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Location: USA

Re: New Job 401k Options allocation help!

Post by smarcus3 » Thu Mar 14, 2019 10:30 pm

A bit high but fees and performance of initial investments pale in comparison to contributions when you're young. Way to go maxing out your 401k. Maxing out Roth Iras is always a good thing as well if you can swing it.

If you don't mind he added complexity go with the following. I'm cheap and frugal so I don't use target date funds but they're probably idea for most. Also I don't own any bonds as part of my asset allocation and investing plan.

US funds:
FID 500 INDEX (FXAIX)
FID EXTD MKT IDX (FSMAX)
DFA US SMALL CAP I (DFSTX)

International:
FID INTL INDEX (FSPSX)

Bonds:
VANG TOT BD MKT ADM (VBTLX)

If you'd like suggestions for percentages just ask.
This is my personal opinion. I'm an engineer not a financial advisor.

Topic Author
junm
Posts: 6
Joined: Thu Mar 14, 2019 8:49 pm

Re: New Job 401k Options allocation help!

Post by junm » Thu Mar 14, 2019 11:00 pm

smarcus3 wrote:
Thu Mar 14, 2019 10:30 pm
A bit high but fees and performance of initial investments pale in comparison to contributions when you're young. Way to go maxing out your 401k. Maxing out Roth Iras is always a good thing as well if you can swing it.

If you don't mind he added complexity go with the following. I'm cheap and frugal so I don't use target date funds but they're probably idea for most. Also I don't own any bonds as part of my asset allocation and investing plan.

US funds:
FID 500 INDEX (FXAIX)
FID EXTD MKT IDX (FSMAX)
DFA US SMALL CAP I (DFSTX)

International:
FID INTL INDEX (FSPSX)

Bonds:
VANG TOT BD MKT ADM (VBTLX)

If you'd like suggestions for percentages just ask.
You think you can suggest some percentages?

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smarcus3
Posts: 244
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Location: USA

Re: New Job 401k Options allocation help!

Post by smarcus3 » Thu Mar 14, 2019 11:03 pm

Sure. Have you decided what % you'd like to hold in bonds. I'd advise to be low to none as you're young and market volatility doesn't matter over a long time horizon of 40 years you have. But at the end of the day you need to be comfortable with your choice as you have to love with it not me. :) Though I have no plans to change from 100% equities until I near retirement

Tomorrow morning I'll toss some together assuming 15% bonds as you stated that above.
Last edited by smarcus3 on Thu Mar 14, 2019 11:11 pm, edited 1 time in total.
This is my personal opinion. I'm an engineer not a financial advisor.

Flyer24
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Re: New Job 401k Options allocation help!

Post by Flyer24 » Thu Mar 14, 2019 11:09 pm

Don’t do the target fund. It is too expensive.

lakpr
Posts: 721
Joined: Fri Mar 18, 2011 9:59 am

Re: New Job 401k Options allocation help!

Post by lakpr » Fri Mar 15, 2019 6:55 am

I would not choose the target date funds either. The fees on those funds is 10 times more than what can be put together by choosing appropriate index funds available.

One exception I would make is to recommend the Fidelity Contra fund. This fund has had an excellent track record over the past decade, handily beating the S&P 500 index fund by a 4% margin per year. The fund manager is still at the helm. You might want to put about $5000 per year of your annual contributions into this fund, then distribute the remaining $14000 into index funds.

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smarcus3
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Location: USA

Re: New Job 401k Options allocation help!

Post by smarcus3 » Fri Mar 15, 2019 7:29 am

This allocation assumes that you want the same US large cap, mid cap and small cap as a common US total index fund. In addition it assumes you want to hold 35% of your equities international and 15% of your total allocation in bonds

US large cap 42%
US mid cap 10 %
US small cap 3 %
International 30%
Bonds 15%

The blended expense ratio is .23%. The target date fund is .6% The expenses at this stage are tiny. If simplification makes investing happen instead of information paralysis is more than worth it. Once the portfolio is large then fees take a larger bite and the investor may be more comfortable with more complexity. For every $10,000 the fee is $66 per annum.
This is my personal opinion. I'm an engineer not a financial advisor.

MichCPA
Posts: 401
Joined: Fri Jul 06, 2018 9:06 pm

Re: New Job 401k Options allocation help!

Post by MichCPA » Fri Mar 15, 2019 7:38 am

Just an FYI for everyone, the Fidelity Freedom funds (used here) are active funds with higher costs, while the Fidelity Freedom INDEX funds are what the name implies. I don't think of it as an apples to apples choice between index and TD in this case. I recommend OP use the indexes. 60% Fid 500 30% Fid international, 10% VG bond.

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ruralavalon
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Location: Illinois

Re: New Job 401k Options allocation help!

Post by ruralavalon » Fri Mar 15, 2019 10:24 am

Welcome to the forum :) .

It's great to see that you are making maximum annual contributions to your 401k, have a Roth IRA, have a good emergency fund, and are debt free.

You have excellent funds offered in your 401k, you are fortunate.

junm wrote:
Thu Mar 14, 2019 8:51 pm
Age: 23
Desired Asset allocation: 85% stocks / 15% bonds

Desired International allocation: 30% of stocks
In my opinion your desired asset allocation is within the range of what is reasonable.

That works out to about 15% bonds, 25% international stocks, and 60% domestic stocks.


junm wrote:
Thu Mar 14, 2019 8:51 pm
401k Portfolio Size: 23k
Roth IRA Portfolio Size: 11k
Other Portfolio Size: 0
What fund firm is your Roth IRA with?

It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio.


junm wrote:
Thu Mar 14, 2019 8:51 pm
These are the options I have.

What do you guys think would be the best option (with fee and everything considered)?
The target date funds have high expense ratios (0.65%). Don't use them.

In selecting funds to use strive for a combination of both broad diversification (to decrease risk) and low expense ratios (to increase net return).

To simply and easily achieve both broad diversification and low expense ratios I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

In my opinion in your 401k the better funds to consider using are:
1) Fidelity 500 Index Fund (81% of U.S. stock market) (FXAIX) ER 0.015%;
2) Fidelity International Index Fund (larger companies, developed markets only, excluding Canada) (FSPSX) ER 0.045%; and
3) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund 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 27 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.

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.
Last edited by ruralavalon on Fri Mar 15, 2019 10:30 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Jack FFR1846
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Re: New Job 401k Options allocation help!

Post by Jack FFR1846 » Fri Mar 15, 2019 10:29 am

100% FID 500 INDEX (FXAIX)

In my opinion, until you've got $100k invested....especially at your age....just ride the market. At $100k, re-evaluate and go to what EHEngineer suggests in the % you want.
Bogle: Smart Beta is stupid

Topic Author
junm
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Re: New Job 401k Options allocation help!

Post by junm » Fri Mar 15, 2019 11:34 am

I have went ahead and changed the contribution thanks to everyone's help!

Image

This is what i have decided on. 10% bonds/90% stocks.

Also, do I now have to rebalance (aka, sell everything I have currrently (the Fidelity Freedom 2060 Target fund)), or will fidelity do all the rebalncing for me?

Doug E. Dee
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Re: New Job 401k Options allocation help!

Post by Doug E. Dee » Fri Mar 15, 2019 1:18 pm

It depends on if you changed your allocation for existing balance or future contributions or both.

lakpr
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Re: New Job 401k Options allocation help!

Post by lakpr » Fri Mar 15, 2019 1:57 pm

junm wrote:
Fri Mar 15, 2019 11:34 am
I have went ahead and changed the contribution thanks to everyone's help!

Image

This is what i have decided on. 10% bonds/90% stocks.

Also, do I now have to rebalance (aka, sell everything I have currrently (the Fidelity Freedom 2060 Target fund)), or will fidelity do all the rebalncing for me?
I'd flip the contribution percentages to Mid-Cap and Small-Cap. To approximate the total market within a margin of error, you should have 85% large caps, 5% mid-caps, and 10% small-caps. If that's not the intention and you want to tilt towards mid-cap more and it's a deliberate choice, that's ok also.

Topic Author
junm
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Joined: Thu Mar 14, 2019 8:49 pm

Re: New Job 401k Options allocation help!

Post by junm » Fri Mar 15, 2019 3:01 pm

lakpr wrote:
Fri Mar 15, 2019 1:57 pm
junm wrote:
Fri Mar 15, 2019 11:34 am
I have went ahead and changed the contribution thanks to everyone's help!

Image

This is what i have decided on. 10% bonds/90% stocks.

Also, do I now have to rebalance (aka, sell everything I have currrently (the Fidelity Freedom 2060 Target fund)), or will fidelity do all the rebalncing for me?
I'd flip the contribution percentages to Mid-Cap and Small-Cap. To approximate the total market within a margin of error, you should have 85% large caps, 5% mid-caps, and 10% small-caps. If that's not the intention and you want to tilt towards mid-cap more and it's a deliberate choice, that's ok also.
By flip, do you mean to decrease it so that it fits the percentages you mentioned? (i have 60% in U.S. stocks so 60*0.85 into large, 60*0.10 into mid, 60*0.05 into small?)

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: New Job 401k Options allocation help!

Post by lakpr » Fri Mar 15, 2019 3:05 pm

junm wrote:
Fri Mar 15, 2019 3:01 pm
lakpr wrote:
Fri Mar 15, 2019 1:57 pm
junm wrote:
Fri Mar 15, 2019 11:34 am
I have went ahead and changed the contribution thanks to everyone's help!

Image

This is what i have decided on. 10% bonds/90% stocks.

Also, do I now have to rebalance (aka, sell everything I have currrently (the Fidelity Freedom 2060 Target fund)), or will fidelity do all the rebalncing for me?
I'd flip the contribution percentages to Mid-Cap and Small-Cap. To approximate the total market within a margin of error, you should have 85% large caps, 5% mid-caps, and 10% small-caps. If that's not the intention and you want to tilt towards mid-cap more and it's a deliberate choice, that's ok also.
By flip, do you mean to decrease it so that it fits the percentages you mentioned? (i have 60% in U.S. stocks so 60*0.85 into large, 60*0.10 into mid, 60*0.05 into small?)
Yes that's correct, that's what I meant in my previous post.

However, I have just now reviewed the composition of the Fidelity Extended Market Index fund, it seems it contains both the Mid-Cap and Small-Cap. So your portfolio as you have mentioned, has a slight small-cap tilt (5%) which might be what you intended. I withdraw my comment, please ignore ...

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ruralavalon
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Re: New Job 401k Options allocation help!

Post by ruralavalon » Fri Mar 15, 2019 5:16 pm

An extended market fund, sometimes called a"completion index fund", contains stocks of both mid-cap and small-cap companies , is intended to be used to supplement a S&P 500 index fund in order to mimic a total stock market index fund. Wiki article "Extended market index fund".


An 82/18 mix of S&P 500/extended market will mimic the content of a total stock market index fund. Wiki article "Approximating total stock market".

As mentioned before an S&P 500 index fund 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".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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