Target funds and others in my 401k

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Topic Author
deskbum
Posts: 12
Joined: Thu Aug 24, 2017 3:00 pm

Target funds and others in my 401k

Post by deskbum » Mon Jan 13, 2020 3:56 pm

I have been going back an forth on this for quite a while. I talked with a guy that was wanting me to bring my plan to him but I was not very fond of him. At first he was going to change quite a bit of my funds before he even knew what I had but after a lot of questions and feeling me out, he said he thought I was on the right track. Left it at that... He either figured me out that I was not bringing him my account or I had him so confused he didn't want to mess with me anymore... lo He was going back and forth on the target fund as far as if I should reallocate. That brought me back to here for some advice. I basically had a vision but then I hit a point in my life where I felt like I would just let the target fund do its job. Instead of moving it around I just put 70% into target and 30% into one of the others, where I feel need to keep me somewhat balanced. So here is my breakdown below. My question is should I just continue to do majority in target and switch up once in a while like I have been doing or should I rebalance everything or just put everything into Target? I still like the idea of having more specific fund even though I know I am getting some double exposure in the target fund. I feel like once I retire I could cash in on the more aggressive funds on good years and the target fund on down years.
Thoughts????????

Fund Price Current investment mix
Dodge & Cox Stock Fund $196.74 11.43%
Target Retirement 2035 Trust I $63.36 24.92%
Union Pacific Common Stock Fund $114.44 16.64%
Vanguard Inst500 Index Trust $138.37 16.59%
Vanguard Inst Total Bond Trust $109.87 2.90%
Vanguard International Growth Fund Admiral Shares $105.34 3.13%
Vanguard Mid-Cap Index Fund Inst Plus Shares $242.06 13.36%
Vanguard Real Estate Index Fund Ins Shares $20.25 5.90%
Vanguard Wellington Fund Admiral Shares $75.30 5.12%

JBTX
Posts: 5768
Joined: Wed Jul 26, 2017 12:46 pm

Re: Target funds and others in my 401k

Post by JBTX » Mon Jan 13, 2020 4:04 pm

deskbum wrote:
Mon Jan 13, 2020 3:56 pm
I have been going back an forth on this for quite a while. I talked with a guy that was wanting me to bring my plan to him but I was not very fond of him. At first he was going to change quite a bit of my funds before he even knew what I had but after a lot of questions and feeling me out, he said he thought I was on the right track. Left it at that... He either figured me out that I was not bringing him my account or I had him so confused he didn't want to mess with me anymore... lo He was going back and forth on the target fund as far as if I should reallocate. That brought me back to here for some advice. I basically had a vision but then I hit a point in my life where I felt like I would just let the target fund do its job. Instead of moving it around I just put 70% into target and 30% into one of the others, where I feel need to keep me somewhat balanced. So here is my breakdown below. My question is should I just continue to do majority in target and switch up once in a while like I have been doing or should I rebalance everything or just put everything into Target? I still like the idea of having more specific fund even though I know I am getting some double exposure in the target fund. I feel like once I retire I could cash in on the more aggressive funds on good years and the target fund on down years.
Thoughts????????

Fund Price Current investment mix
Dodge & Cox Stock Fund $196.74 11.43%
Target Retirement 2035 Trust I $63.36 24.92%
Union Pacific Common Stock Fund $114.44 16.64%
Vanguard Inst500 Index Trust $138.37 16.59%
Vanguard Inst Total Bond Trust $109.87 2.90%
Vanguard International Growth Fund Admiral Shares $105.34 3.13%
Vanguard Mid-Cap Index Fund Inst Plus Shares $242.06 13.36%
Vanguard Real Estate Index Fund Ins Shares $20.25 5.90%
Vanguard Wellington Fund Admiral Shares $75.30 5.12%
I'm good with target date funds. I have increased my share of them. As to the rest, I think what you are doing is fine, although i don't know what you are doing with the union pacific stock.

retired@50
Posts: 1061
Joined: Tue Oct 01, 2019 2:36 pm

Re: Target funds and others in my 401k

Post by retired@50 » Mon Jan 13, 2020 4:29 pm

It appears you have a desire to tinker with your investments. To restrain yourself, I'd suggest you go "all in" on target date retirement fund and hold nothing else. Knowing yourself and your own worst tendencies, and setting up strategies to put a stop to those tendencies can go a long way toward investing success.

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

Olemiss540
Posts: 1180
Joined: Fri Aug 18, 2017 8:46 pm

Re: Target funds and others in my 401k

Post by Olemiss540 » Mon Jan 13, 2020 4:47 pm

Target date funds are fantastic and are where all my :moneybag is located! Low cost and extremely diverse. When in doubt, choose the simplest approach!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
deskbum
Posts: 12
Joined: Thu Aug 24, 2017 3:00 pm

Re: Target funds and others in my 401k

Post by deskbum » Thu Jan 16, 2020 11:05 am

Why are people against target funds?

Synyster
Posts: 15
Joined: Thu Sep 10, 2015 3:44 pm

Re: Target funds and others in my 401k

Post by Synyster » Thu Jan 16, 2020 11:24 am

deskbum wrote:
Thu Jan 16, 2020 11:05 am
Why are people against target funds?
For me its the expense ratio and the amount put in bonds, for my age at least. Being 32, I have at least 20-25 years until I can retire. I had 100% of my money in a Roth with VFIFX. I don't need 10% bonds at my age. I need something aggressive as I have the will power to stay during a bear. The other part is the expense ratio. I will probably save around $23,000 over the life of the fund by exchanging it for VTSAX.

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powermega
Posts: 1164
Joined: Fri May 16, 2014 12:07 am
Location: Colorado

Re: Target funds and others in my 401k

Post by powermega » Thu Jan 16, 2020 11:54 am

Roughly half of our entire portfolio is in one of the Vanguard target date funds (TDF). The TDF is really just a composite fund of 5 other broad market funds. We also invest in those individual component funds as well. Overall, about 85% of our entire portfolio is either in the TDF itself or in the various components of the TDF. We allocate to those component funds with the same allocation that the TDF does. Likewise, both of us put 100% of our 401k contributions into the TDF. The net results is that our entire portfolio mostly models the TDF, with a couple of tilts added (REIT, SCV). The entire portfolio stays reasonably balanced all year, so we only have to tinker with it once a year when we're allocating our new IRA and HSA contributions.

We don't like TDFs in a taxable account though. We invest in the equity TDF components in our taxable account and compensate with extra bonds in our 401k accounts.

I'm a big fan of the TDF because it's simple, rational, risk-efficient, and disciplined. I wouldn't worry about the differential expense ratio. VTTHX has an expense ratio of 0.14%. The component expense ratio would be:
VTSAX: 0.04% (45.4%)
VTIAX: 0.11% (30.5%)
VBTLX: 0.05% (17.2%)
VTABX: 0.11% (6.9%)
=> Weighted avg. = 0.0679%

The $72.10 extra per $100k invested is worth the daily rebalancing that VTTHX provides, IMO. Perhaps when the portfolio gets to be over $1M, then you can decide if the extra $721 per year is worth it invest in the components alone.
Even a stopped clock is right twice a day.

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