Please recommend 401k Allocation with new Employer

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Topic Author
sbz
Posts: 4
Joined: Thu Feb 27, 2020 12:08 am

Please recommend 401k Allocation with new Employer

Post by sbz » Tue Mar 24, 2020 11:04 am

Hello, hope everyone is staying safe amidst this craziness.

I have recently switch jobs and am going back on forth on my 401k allocation. I have emergency fund and everything and can max 401k for the remainder of year. I also have been doing 3 fund portfolio (60/30/10) valuing ~40,000 (huge drop from ~60,000 early this year). but I guess i am now unsure whether I should pull back on contributions/change my allocation %. Now that I have a new job and am put in the spot to decide my new allocations, wanted to reach out and ask for guidance. And I would also like some assistance on picking the right funds.

Age: 25

If i continue "naively" with existing set up I would probably choose these 3?

VLCAX Vanguard Large Cap Index Adm
VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm


The funds available are the following:

INVESTMENT FUND INVESTMENT CLASS TICKER EXPENSE RATIO AS OF DATE ONE MONTH THREE MONTH ONE YEAR THREE YEAR FIVE YEAR TEN YEAR SINCE INCEPTION YTD MONTH END
Vanguard Instl Target Retirement 2065 Target Date VSXFX 0.09% 12/31/2019 N/A 8.01% 25.15% N/A N/A N/A 9.89%
(07/12/2017) 25.15%
Oakmark Investor Large Cap U.S. Stock OAKMX 0.89% 12/31/2019 N/A 11.33% 26.98% 10.32% 8.82% 12.43% 12.48%
(08/05/1991) 26.98%
BlackRock Inflation Protected Bond K Diversified Bond BPLBX 0.50% 12/31/2019 N/A 1.24% 8.28% 3.12% 2.32% 3.05% 4.26%
(06/24/2004) 8.28%
BlackRock High Yield Bond K High Yield Bond BRHYX 0.50% 12/31/2019 N/A 2.86% 15.58% 6.77% 5.91% 8.02% 7.47%
(11/19/1998) 15.58%
DFA U.S. Small Cap Portfolio I Small Cap U.S. Stock DFSTX 0.37% 12/31/2019 N/A 8.46% 21.75% 5.66% 7.10% 12.11% 10.20%
(03/19/1992) 21.75%
BrandywineGLOBAL Global Opport Bond IS Diversified Bond GOBSX 0.59% 12/31/2019 N/A 4.11% 9.21% 5.43% 2.40% 4.72% 5.10%
(11/01/2006) 9.21%
Harbor International Ret International Stock HNINX 0.81% 12/31/2019 N/A 9.61% 22.63% 7.38% 3.61% 4.57% 6.90%
(03/01/2016) 22.63%
JPMorgan Mid Cap Growth R6 Mid Cap U.S. Stock JMGMX 0.76% 12/31/2019 N/A 10.44% 39.96% 19.94% 12.27% 14.54% 15.64%
(01/01/2011) 39.96%
JPMorgan Small Cap Value R6 Small Cap U.S. Stock JSVUX 0.77% 12/31/2019 N/A 7.34% 19.42% 2.08% 5.16% 10.37% 7.38%
(02/22/2005) 19.42%
ClearBridge Mid Cap IS Mid Cap U.S. Stock LSIRX 0.73% 12/31/2019 N/A 7.97% 33.38% 9.71% 8.11% 12.00% 9.97%
(N/A) 33.38%
Lord Abbett Total Return R6 Diversified Bond LTRHX 0.37% 12/31/2019 N/A 0.30% 8.64% 3.99% 3.16% 4.38% 3.47%
(N/A) 8.64%
MFS Value R6 Large Cap U.S. Stock MEIKX 0.47% 12/31/2019 N/A 7.11% 30.18% 11.45% 9.51% 11.91% 8.42%
(05/01/2006) 30.18%
Victory Trivalent Intl Small-Cap R6 International Stock MSSIX 1.10% 12/31/2019 N/A 9.76% 27.70% 11.68% 8.34% 10.55% 12.63%
(06/01/2012) 27.70%
American Funds New World R6 International Stock RNWGX 0.60% 12/31/2019 N/A 9.08% 28.03% 14.46% 8.10% 6.76% 9.79%
(05/01/2009) 28.03%
T. Rowe Price Blue Chip Growth I Large Cap U.S. Stock TBCIX 0.57% 12/31/2019 N/A 9.36% 30.13% 22.03% 15.36% 16.03% 16.25%
(12/17/2015) 30.13%
Vanguard Total Bond Market Index Adm Diversified Bond VBTLX 0.05% 12/31/2019 N/A 0.03% 8.71% 4.02% 3.00% 3.68% 4.21%
(11/12/2001) 8.71%
Vanguard Short-Term Invest Grade Adm Diversified Bond VFSUX 0.10% 12/31/2019 N/A 0.63% 5.84% 2.96% 2.56% 2.76% 3.59%
(02/12/2001) 5.84%
Vanguard Mid Cap Index Adm Mid Cap U.S. Stock VIMAX 0.05% 12/31/2019 N/A 6.88% 31.03% 12.36% 9.25% 13.08% 10.12%
(11/12/2001) 31.03%
Vanguard Large Cap Index Adm Large Cap U.S. Stock VLCAX 0.05% 12/31/2019 N/A 9.06% 31.39% 15.27% 11.56% 13.51% 9.21%
(02/02/2004) 31.39%
Vanguard Federal Money Market Inv
(7-Day SEC Yield as of 02/28/2020 was 1.50%) Capital Preservation VMFXX 0.11% 12/31/2019 N/A 0.43% 2.14% 1.58% 1.01% 0.51% 4.13%
(07/13/1981) 2.14%
Vanguard Small-Cap Index Adm Small Cap U.S. Stock VSMAX 0.05% 12/31/2019 N/A 8.14% 27.37% 10.32% 8.88% 12.81% 9.21%
(11/13/2000) 27.37%
Vanguard Total Intl Stock Index Adm International Stock VTIAX 0.11% 12/31/2019 N/A 9.01% 21.51% 9.87% 5.85% 5.10% 5.21%
(11/29/2010) 21.51%
Wells Fargo Special Mid Cap Value R6 Mid Cap U.S. Stock WFPRX 0.73% 12/31/2019 N/A 8.09% 35.68% 9.51% 9.24% 13.22% 11.83%
(06/28/2013) 35.68%
Wells Fargo Small Company Growth R6 Small Cap U.S. Stock WSCRX 0.89% 12/31/2019 N/A 11.48% 26.55% 13.77% 8.71% 13.84% 9.42%
(11/03/2014) 26.55%
Vanguard Instl Target Retirement 2060 Target Date VILVX 0.09% 12/31/2019 N/A 8.04% 25.13% 11.86% N/A N/A 8.35%
(05/28/2015) 25.13%
Vanguard Instl Target Retirement 2055 Target Date VIVLX 0.09% 12/31/2019 N/A 8.03% 25.06% 11.87% N/A N/A 8.37%
(05/28/2015) 25.06%
Vanguard Instl Target Retirement 2050 Target Date VTRLX 0.09% 12/31/2019 N/A 8.02% 25.05% 11.85% N/A N/A 8.36%
(05/28/2015) 25.05%
Vanguard Instl Target Retirement 2045 Target Date VITLX 0.09% 12/31/2019 N/A 8.02% 25.07% 11.86% N/A N/A 8.37%
(05/28/2015) 25.07%
Vanguard Instl Target Retirement 2040 Target Date VIRSX 0.09% 12/31/2019 N/A 7.40% 23.93% 11.52% N/A N/A 8.11%
(05/28/2015) 23.93%
Vanguard Instl Target Retirement 2035 Target Date VITFX 0.09% 12/31/2019 N/A 6.68% 22.56% 10.91% N/A N/A 7.80%
(05/28/2015) 22.56%
Vanguard Instl Target Retirement 2030 Target Date VTTWX 0.09% 12/31/2019 N/A 6.02% 21.14% 10.28% N/A N/A 7.45%
(05/28/2015) 21.14%
Vanguard Instl Target Retirement 2025 Target Date VRIVX 0.09% 12/31/2019 N/A 5.25% 19.67% 9.63% N/A N/A 7.10%
(05/28/2015) 19.67%
Vanguard Instl Target Retirement 2020 Target Date VITWX 0.09% 12/31/2019 N/A 4.47% 17.69% 8.76% N/A N/A 6.57%
(05/28/2015) 17.69%
Vanguard Instl Target Retirement 2015 Target Date VITVX 0.09% 12/31/2019 N/A 3.27% 14.88% 7.54% N/A N/A 5.76%
(05/28/2015) 14.88%
Vanguard Instl Target Retirement Income Target Date VITRX 0.09% 12/31/2019 N/A 2.66% 13.20% 6.39% N/A N/A 5.11%
(05/28/2015) 13.20%

User avatar
Brianmcg321
Posts: 654
Joined: Mon Jul 15, 2019 8:23 am

Re: Please recommend 401k Allocation with new Employer

Post by Brianmcg321 » Tue Mar 24, 2020 11:37 am

With those choices I'd just put it in the Target Retirement fund of your choice.

Strange they don't offer a Vanguard total market index.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

User avatar
Thrifty Femme
Posts: 403
Joined: Sun Apr 12, 2015 1:54 pm

Re: Please recommend 401k Allocation with new Employer

Post by Thrifty Femme » Tue Mar 24, 2020 2:49 pm

At your age I would allocate more stocks and less bonds if you can stomach large drops in value. You should increase contributions not pull back. Buy when prices are lower like now. Finally the funds you have chosen are fine. You have a long horizon ahead of you to retirement. Take advantage of time in market while you can.

retired@50
Posts: 1731
Joined: Tue Oct 01, 2019 2:36 pm

Re: Please recommend 401k Allocation with new Employer

Post by retired@50 » Tue Mar 24, 2020 2:58 pm

sbz wrote:
Tue Mar 24, 2020 11:04 am

Age: 25

If i continue "naively" with existing set up I would probably choose these 3?

VLCAX Vanguard Large Cap Index Adm
VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm
In your situation, I'd use this fund [ Vanguard Instl Target Retirement 2060 Target Date VILVX 0.09% ] for 100% of my contributions, and I wouldn't slow down or speed up my contributions based on the current market environment. Just buy like you normally would, every two weeks, or every pay period, all year long, every year, year after year, for the rest of your career.

You'll never even be aware of the dozens of mistakes you might have made by trying to pick and choose which times to invest, or which funds to invest in. Target date funds (especially ones with expenses as low as 9 basis points) are age appropriate, broadly diversified, and risk adjusted into retirement. You could do worse 100 different ways. You likely won't do better.

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

lakpr
Posts: 4501
Joined: Fri Mar 18, 2011 9:59 am

Re: Please recommend 401k Allocation with new Employer

Post by lakpr » Tue Mar 24, 2020 4:25 pm

@sbz,

Vanguard Target retirement funds invest 45% of the equity portion of the portfolio into international equities. How comfortable are you with that allocation? Would you want a lower amount than 45% to be allocated to international equities, or just have the ability to fine tune?

With Target Date funds, you will have a single fund and ultimate simplicity -- but the trade off is that you won't be able to fine tune the amount of your contribution being allocated to international equities. With a 3-fund portfolio, you will be able to do so.

There is no essential difference between the costs of the target-date fund or a 3-fund portfolio. Perhaps it comes down to $20 for every $100k, at most.

RomeoMustDie
Posts: 83
Joined: Sat Mar 14, 2020 6:07 pm

Re: Please recommend 401k Allocation with new Employer

Post by RomeoMustDie » Tue Mar 24, 2020 4:30 pm

sbz wrote:
Tue Mar 24, 2020 11:04 am
Hello, hope everyone is staying safe amidst this craziness.

I have recently switch jobs and am going back on forth on my 401k allocation. I have emergency fund and everything and can max 401k for the remainder of year. I also have been doing 3 fund portfolio (60/30/10) valuing ~40,000 (huge drop from ~60,000 early this year). but I guess i am now unsure whether I should pull back on contributions/change my allocation %. Now that I have a new job and am put in the spot to decide my new allocations, wanted to reach out and ask for guidance. And I would also like some assistance on picking the right funds.

Age: 25

If i continue "naively" with existing set up I would probably choose these 3?

VLCAX Vanguard Large Cap Index Adm
VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm


The funds available are the following:

INVESTMENT FUND INVESTMENT CLASS TICKER EXPENSE RATIO AS OF DATE ONE MONTH THREE MONTH ONE YEAR THREE YEAR FIVE YEAR TEN YEAR SINCE INCEPTION YTD MONTH END
Vanguard Instl Target Retirement 2065 Target Date VSXFX 0.09% 12/31/2019 N/A 8.01% 25.15% N/A N/A N/A 9.89%
(07/12/2017) 25.15%
Oakmark Investor Large Cap U.S. Stock OAKMX 0.89% 12/31/2019 N/A 11.33% 26.98% 10.32% 8.82% 12.43% 12.48%
(08/05/1991) 26.98%
BlackRock Inflation Protected Bond K Diversified Bond BPLBX 0.50% 12/31/2019 N/A 1.24% 8.28% 3.12% 2.32% 3.05% 4.26%
(06/24/2004) 8.28%
BlackRock High Yield Bond K High Yield Bond BRHYX 0.50% 12/31/2019 N/A 2.86% 15.58% 6.77% 5.91% 8.02% 7.47%
(11/19/1998) 15.58%
DFA U.S. Small Cap Portfolio I Small Cap U.S. Stock DFSTX 0.37% 12/31/2019 N/A 8.46% 21.75% 5.66% 7.10% 12.11% 10.20%
(03/19/1992) 21.75%
BrandywineGLOBAL Global Opport Bond IS Diversified Bond GOBSX 0.59% 12/31/2019 N/A 4.11% 9.21% 5.43% 2.40% 4.72% 5.10%
(11/01/2006) 9.21%
Harbor International Ret International Stock HNINX 0.81% 12/31/2019 N/A 9.61% 22.63% 7.38% 3.61% 4.57% 6.90%
(03/01/2016) 22.63%
JPMorgan Mid Cap Growth R6 Mid Cap U.S. Stock JMGMX 0.76% 12/31/2019 N/A 10.44% 39.96% 19.94% 12.27% 14.54% 15.64%
(01/01/2011) 39.96%
JPMorgan Small Cap Value R6 Small Cap U.S. Stock JSVUX 0.77% 12/31/2019 N/A 7.34% 19.42% 2.08% 5.16% 10.37% 7.38%
(02/22/2005) 19.42%
ClearBridge Mid Cap IS Mid Cap U.S. Stock LSIRX 0.73% 12/31/2019 N/A 7.97% 33.38% 9.71% 8.11% 12.00% 9.97%
(N/A) 33.38%
Lord Abbett Total Return R6 Diversified Bond LTRHX 0.37% 12/31/2019 N/A 0.30% 8.64% 3.99% 3.16% 4.38% 3.47%
(N/A) 8.64%
MFS Value R6 Large Cap U.S. Stock MEIKX 0.47% 12/31/2019 N/A 7.11% 30.18% 11.45% 9.51% 11.91% 8.42%
(05/01/2006) 30.18%
Victory Trivalent Intl Small-Cap R6 International Stock MSSIX 1.10% 12/31/2019 N/A 9.76% 27.70% 11.68% 8.34% 10.55% 12.63%
(06/01/2012) 27.70%
American Funds New World R6 International Stock RNWGX 0.60% 12/31/2019 N/A 9.08% 28.03% 14.46% 8.10% 6.76% 9.79%
(05/01/2009) 28.03%
T. Rowe Price Blue Chip Growth I Large Cap U.S. Stock TBCIX 0.57% 12/31/2019 N/A 9.36% 30.13% 22.03% 15.36% 16.03% 16.25%
(12/17/2015) 30.13%
Vanguard Total Bond Market Index Adm Diversified Bond VBTLX 0.05% 12/31/2019 N/A 0.03% 8.71% 4.02% 3.00% 3.68% 4.21%
(11/12/2001) 8.71%
Vanguard Short-Term Invest Grade Adm Diversified Bond VFSUX 0.10% 12/31/2019 N/A 0.63% 5.84% 2.96% 2.56% 2.76% 3.59%
(02/12/2001) 5.84%
Vanguard Mid Cap Index Adm Mid Cap U.S. Stock VIMAX 0.05% 12/31/2019 N/A 6.88% 31.03% 12.36% 9.25% 13.08% 10.12%
(11/12/2001) 31.03%
Vanguard Large Cap Index Adm Large Cap U.S. Stock VLCAX 0.05% 12/31/2019 N/A 9.06% 31.39% 15.27% 11.56% 13.51% 9.21%
(02/02/2004) 31.39%
Vanguard Federal Money Market Inv
(7-Day SEC Yield as of 02/28/2020 was 1.50%) Capital Preservation VMFXX 0.11% 12/31/2019 N/A 0.43% 2.14% 1.58% 1.01% 0.51% 4.13%
(07/13/1981) 2.14%
Vanguard Small-Cap Index Adm Small Cap U.S. Stock VSMAX 0.05% 12/31/2019 N/A 8.14% 27.37% 10.32% 8.88% 12.81% 9.21%
(11/13/2000) 27.37%
Vanguard Total Intl Stock Index Adm International Stock VTIAX 0.11% 12/31/2019 N/A 9.01% 21.51% 9.87% 5.85% 5.10% 5.21%
(11/29/2010) 21.51%
Wells Fargo Special Mid Cap Value R6 Mid Cap U.S. Stock WFPRX 0.73% 12/31/2019 N/A 8.09% 35.68% 9.51% 9.24% 13.22% 11.83%
(06/28/2013) 35.68%
Wells Fargo Small Company Growth R6 Small Cap U.S. Stock WSCRX 0.89% 12/31/2019 N/A 11.48% 26.55% 13.77% 8.71% 13.84% 9.42%
(11/03/2014) 26.55%
Vanguard Instl Target Retirement 2060 Target Date VILVX 0.09% 12/31/2019 N/A 8.04% 25.13% 11.86% N/A N/A 8.35%
(05/28/2015) 25.13%
Vanguard Instl Target Retirement 2055 Target Date VIVLX 0.09% 12/31/2019 N/A 8.03% 25.06% 11.87% N/A N/A 8.37%
(05/28/2015) 25.06%
Vanguard Instl Target Retirement 2050 Target Date VTRLX 0.09% 12/31/2019 N/A 8.02% 25.05% 11.85% N/A N/A 8.36%
(05/28/2015) 25.05%
Vanguard Instl Target Retirement 2045 Target Date VITLX 0.09% 12/31/2019 N/A 8.02% 25.07% 11.86% N/A N/A 8.37%
(05/28/2015) 25.07%
Vanguard Instl Target Retirement 2040 Target Date VIRSX 0.09% 12/31/2019 N/A 7.40% 23.93% 11.52% N/A N/A 8.11%
(05/28/2015) 23.93%
Vanguard Instl Target Retirement 2035 Target Date VITFX 0.09% 12/31/2019 N/A 6.68% 22.56% 10.91% N/A N/A 7.80%
(05/28/2015) 22.56%
Vanguard Instl Target Retirement 2030 Target Date VTTWX 0.09% 12/31/2019 N/A 6.02% 21.14% 10.28% N/A N/A 7.45%
(05/28/2015) 21.14%
Vanguard Instl Target Retirement 2025 Target Date VRIVX 0.09% 12/31/2019 N/A 5.25% 19.67% 9.63% N/A N/A 7.10%
(05/28/2015) 19.67%
Vanguard Instl Target Retirement 2020 Target Date VITWX 0.09% 12/31/2019 N/A 4.47% 17.69% 8.76% N/A N/A 6.57%
(05/28/2015) 17.69%
Vanguard Instl Target Retirement 2015 Target Date VITVX 0.09% 12/31/2019 N/A 3.27% 14.88% 7.54% N/A N/A 5.76%
(05/28/2015) 14.88%
Vanguard Instl Target Retirement Income Target Date VITRX 0.09% 12/31/2019 N/A 2.66% 13.20% 6.39% N/A N/A 5.11%
(05/28/2015) 13.20%
I am also 25.

The company provides a Fidelity 401k account.

I'm 100% allocated to stocks at the base 4% allocation to max out employer contributions.

I've replicated VTI using a combination of the large, mid, and small cap index funds.

Of course the account type is Roth IRA not traditional IRA.

Topic Author
sbz
Posts: 4
Joined: Thu Feb 27, 2020 12:08 am

Re: Please recommend 401k Allocation with new Employer

Post by sbz » Wed Mar 25, 2020 2:42 am

Thank you for the reply everyone. From my very short lived experience with the international market and how i imagine it to turn out (again trying my best to not time the market but cant help it), it has not been a good experience and is not looking too good in my eyes. I don't think I would be comfortable of ~40%+ allocation into international, please enlighten me if I am not sounding smart here! I am looking at staying 60 30 10 or even 65 30 5 (reducing some bonds) so I can start buying this "dip".

Also I would be ok with building my own vanguard total market index using the existing large,mid,small cap funds. Is this possible/a good idea? If so, what % distribution should I do for each funds? 33/33/33 split?

Much appreciated!

lakpr
Posts: 4501
Joined: Fri Mar 18, 2011 9:59 am

Re: Please recommend 401k Allocation with new Employer

Post by lakpr » Wed Mar 25, 2020 6:59 am

sbz wrote:
Wed Mar 25, 2020 2:42 am
Thank you for the reply everyone. From my very short lived experience with the international market and how i imagine it to turn out (again trying my best to not time the market but cant help it), it has not been a good experience and is not looking too good in my eyes. I don't think I would be comfortable of ~40%+ allocation into international, please enlighten me if I am not sounding smart here! I am looking at staying 60 30 10 or even 65 30 5 (reducing some bonds) so I can start buying this "dip".

Also I would be ok with building my own vanguard total market index using the existing large,mid,small cap funds. Is this possible/a good idea? If so, what % distribution should I do for each funds? 33/33/33 split?

Much appreciated!
If you are not comfortable with a 40%+ allocation to international stocks, then Target date funds are not the right solution for you since ALL Vanguard Target Retirement funds carry this fixed ratio of 55:45 between domestic and international equities (for the stock portion). So if you are more comfortable with a 60:30:10, you need to adopt a 3-fund portfolio.

VLCAX Vanguard Large Cap Index Adm
VSMAX Vanguard Small-Cap Index Adm Small Cap U.S. Stock

Invest the domestic stock portion in a ratio of 87:13 in the above two funds, and you will approximate the Total US Stock Market.
See Approximating total stock market wiki entry and scroll down

VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm

So to get a 60:30:10, you need to really invest in a 52:8:30:10 among VLCAX:VSMAX:VTIAX:VBTLX

retired@50
Posts: 1731
Joined: Tue Oct 01, 2019 2:36 pm

Re: Please recommend 401k Allocation with new Employer

Post by retired@50 » Wed Mar 25, 2020 10:51 am

lakpr wrote:
Wed Mar 25, 2020 6:59 am
sbz wrote:
Wed Mar 25, 2020 2:42 am
Thank you for the reply everyone. From my very short lived experience with the international market and how i imagine it to turn out (again trying my best to not time the market but cant help it), it has not been a good experience and is not looking too good in my eyes. I don't think I would be comfortable of ~40%+ allocation into international, please enlighten me if I am not sounding smart here! I am looking at staying 60 30 10 or even 65 30 5 (reducing some bonds) so I can start buying this "dip".

Also I would be ok with building my own vanguard total market index using the existing large,mid,small cap funds. Is this possible/a good idea? If so, what % distribution should I do for each funds? 33/33/33 split?

Much appreciated!
If you are not comfortable with a 40%+ allocation to international stocks, then Target date funds are not the right solution for you since ALL Vanguard Target Retirement funds carry this fixed ratio of 55:45 between domestic and international equities (for the stock portion). So if you are more comfortable with a 60:30:10, you need to adopt a 3-fund portfolio.

VLCAX Vanguard Large Cap Index Adm
VSMAX Vanguard Small-Cap Index Adm Small Cap U.S. Stock

Invest the domestic stock portion in a ratio of 87:13 in the above two funds, and you will approximate the Total US Stock Market.
See Approximating total stock market wiki entry and scroll down

VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm

So to get a 60:30:10, you need to really invest in a 52:8:30:10 among VLCAX:VSMAX:VTIAX:VBTLX
I'm on board with having the ability to control what percentage of equity will be invested internationally vs. domestically. The mixture that lakpr mentions is certainly reasonable as well. However, the phrase above in bold red appears to be false. According to numbers published on the Vanguard website for the 2060, 2050, 2040, 2030 target funds, they each hold 40% of equity in international.

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

jpelder
Posts: 723
Joined: Mon Jan 26, 2015 3:56 pm
Location: Concord, NC

Re: Please recommend 401k Allocation with new Employer

Post by jpelder » Wed Mar 25, 2020 11:17 am

I would also recommend the Target-Date funds. DW and I's IRAs are invested in the Vanguard Target Date 2055 fund (we're both about 30). In the current market, not having to worry about rebalancing and the temptation to tinker with allocation is nice. Same thing over the past few years when the market has been steadily climbing.

Why are you not comfortable with a 40% international allocation? (the Target-Date funds split the stock portion 60% US and 40% international, not 55-45 as another poster indicated). For perspective, international stocks outperformed US stocks (by close to 2%) between the dot com crash and the 2008 crash. This may happen again in the future.

If you want to make your own portfolio, it looks like 81% S&P 500 index, 4% Mid-cap index, and 15% small-cap index will approximate the total US market. See https://www.bogleheads.org/wiki/Approxi ... ock_market

Weird that they don't have a total US market index. Then add international (Vanguard Total International) and bonds (Vanguard Total Bond) to your liking.

User avatar
ruralavalon
Posts: 17726
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Please recommend 401k Allocation with new Employer

Post by ruralavalon » Wed Mar 25, 2020 12:20 pm

You have excellent funds offered in your employer's 401k plan, you are fortunate.

sbz wrote:
Tue Mar 24, 2020 11:04 am
. . . but I guess i am now unsure whether I should pull back on contributions/change my allocation %. Now that I have a new job and am put in the spot to decide my new allocations, wanted to reach out and ask for guidance. And I would also like some assistance on picking the right funds.

Age: 25

If i continue "naively" with existing set up I would probably choose these 3?

VLCAX Vanguard Large Cap Index Adm
VTIAX Vanguard Total Intl Stock Index Adm
VBTLX Vanguard Total Bond Market Index Adm
sbz wrote:
Wed Mar 25, 2020 2:42 am
Thank you for the reply everyone. From my very short lived experience with the international market and how i imagine it to turn out (again trying my best to not time the market but cant help it), it has not been a good experience and is not looking too good in my eyes. I don't think I would be comfortable of ~40%+ allocation into international, please enlighten me if I am not sounding smart here! I am looking at staying 60 30 10 or even 65 30 5 (reducing some bonds) so I can start buying this "dip".

Also I would be ok with building my own vanguard total market index using the existing large,mid,small cap funds. Is this possible/a good idea? If so, what % distribution should I do for each funds? 33/33/33 split?

Much appreciated!
Contributions.
At age 25 establishing a high rate of contributions is the most important investing decision you can make.

Do not "pull back" on your 401k contributions. Continue with automatic contributions every pay period. If practical increase your contributions. The annual maximum is $19.5k.



Suggestion for asset allocation.
You have selected the correct three funds to use in my opinion.

I suggest:
1) 60%, Vanguard Large-Cap Index Fund Admiral Shares (VLCAX);
2) 20%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX); and
3) 20%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX).

Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.


Asset allocation, bonds.
At age 25 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation"; and
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio".



Asset allocation,International stocks.
I agree that a "40% + allocation to international" is uncomfortable.

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

Morningstar (11/14/2019), "Revisiting the Case for International". "The case for diversifying internationally isn’t as strong as it used to be, especially if you’re looking for significant risk reduction or consistently better returns. From a portfolio perspective, we typically recommend a healthy international weighting--roughly 25% of total assets--for investors with longer time horizons."

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.



Domestic stocks.
In my opinion in a plan which lacks a total stock market index fund Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) is good enough by itself for investing in U.S. stocks.

Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) invests in U.S. stocks that represent the top 85% of market capitalization. In the 16 years since the creation of Vanguard Large-Cap Index Fund, it's performance has been almost identical to that of Vanguard Total Stock Market Index Fund (VTSAX). Portfolio Visualizer, 2005-2020.

If you want to add Vanguard Small-Cap Index Fund (VSMAX) then an 87/13 mix of the large-cap and small-cap index funds will mimic the content of a total stock market index fund. Wiki article "Approximating Total Stock Market" . In my opinion this is not necessary, it is optional if you prefer to do that.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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