Help with mutual fund selection in LFG 403b

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Topic Author
strikerz1
Posts: 3
Joined: Mon Apr 01, 2024 9:12 pm

Help with mutual fund selection in LFG 403b

Post by strikerz1 »

Hi everyone,

I have a 403b plan with Lincoln Financial Group through my employer and wanted advice on how to best distribute my contributions.

These are the funds available to me and their expense ratios:

Equity funds
American Funds Growth Fund of Amer R6 0.30%

Fidelity® Emerging Markets Idx 0.08%

Vanguard Developed Markets Index
Admiral 0.07%

Vanguard Growth Index Admiral 0.05%

Vanguard Mid-Cap Growth Index Admiral 0.07%

Vanguard Mid-Cap Value Index Admiral 0.07%

Vanguard Small Cap Growth Index Admiral 0.07%

Vanguard Small Cap Value Index Admiral 0.07%

Vanguard Value Index Adm 0.05% $0.50 0.05%

Victory Sycamore Established Value R6 0.54%

Virtus KAR Small-Cap Growth I 1.07%

Bond funds
BrandywineGLOBAL Corporate Credit IS 0.50%

DFA World ex US Government Fxd Inc I 0.19%

Metropolitan West Total Return Bd I 0.44%

PIMCO Long-Term Real Return Instl 0.54%

Vanguard Interm-Term Bond Index Adm 0.07%

Vanguard Shrt-Term Infl-Prot Sec Idx Adm 0.06%

Other
DFA Commodity Strategy Institutional 0.30%

Vanguard Real Estate Index Admiral 0.12%

Lincoln Stable Value Account -Z165 0.00%

Transfers from this investment option to
competing funds may be restricted. Transfers may be made to
noncompeting funds if there are no
subsequent transfers to competing funds
within 90 days.


With a moderately aggressive investment profile for retirement date 2055, LFG has the following distribution which I think is suboptimal:

18.90% VNGRD DVLPD MRKTS INDX
14.90% VNGRD INTMD TREM BOND INDX
12.10% VNGRD VALUE INDX
11.11% VICTORY SYCMRE ESTBLS VALUE
7.02% FDLTY EMRG MRKTS INDX
5.96% VNGRD GRWTH INDX
5.06% VNGRD SMCP VALUE INDX
24.95% OTHER (VGSLX, VSGAX, DCMSX, PRAIX, BGISX, VMGMX, DWFIX, Z165)


A lot of these have high expense ratios up to 1.48 for PRAIX and I wanted to simplify and reduce my expenses.

What do you guys think of the following distribution to simulate a three fund portfolio?

VIGAX 40%
VTMGX 30%
VBILX 30%

Would this somewhat simulate VTSAX, VTIAX, and VBTLX? Should I use combinations of the small and mid cap value/growth funds?

Finally, I do have the option of a SDBA through TD Ameritrade where I can just choose the three funds or a target date retirement fund. Would this be worth the hassle and potential fees over trying to make the available mutual funds in LFG work?

Please let me know what you guys think!
User avatar
retired@50
Posts: 13098
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Help with mutual fund selection in LFG 403b

Post by retired@50 »

strikerz1 wrote: Tue Apr 02, 2024 12:36 am Fidelity® Emerging Markets Idx 0.08%
Vanguard Developed Markets Index Admiral 0.07% <- 30% here for international stock. You could also use the Fidelity EM fund above if you really want EM exposure.

Vanguard Growth Index Admiral 0.05% <- 20% here for part of your US stock holding.
Vanguard Value Index Adm 0.05% $0.50 0.05% <- 20% here for the other part of your US stock holding.

Vanguard Interm-Term Bond Index Adm 0.07% <- 30% here, for your bond holding.


What do you guys think of the following distribution to simulate a three fund portfolio?
VIGAX 40%
VTMGX 30%
VBILX 30%

Please let me know what you guys think!
Welcome to the forum.

See comments above in blue.

Excluding the Value index in the US is a mistake in my book. Mixing Value and Growth in a 50/50 split will emulate the US market very closely.

If you decide to use the Emerging Markets fund, then switch the Dev Market percentage to 23% and put the other 7% in the Fidelity EM fund.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
strikerz1
Posts: 3
Joined: Mon Apr 01, 2024 9:12 pm

Re: Help with mutual fund selection in LFG 403b

Post by strikerz1 »

Thank you retired@50 for the really helpful advice! I really appreciate it!
lakpr
Posts: 11788
Joined: Fri Mar 18, 2011 9:59 am

Re: Help with mutual fund selection in LFG 403b

Post by lakpr »

Is your saving all within the 403(b) account, and nothing else within taxable?

Remember that there is an option to buy Series I Savings Bonds, $10k per person per year. If you are maxing out your 403(b) for $23k per year, Roth IRA for $7k per year, and Series I Savings bonds for $10k per year, you can essentially have 25% of your annual retirement contributions to "bonds".

The superb advantage that I-bonds have over the "bond funds" like VBTLX or VBILX is that they will never lose value. Remember 2022! There was a max loss of up to 17% in these total bond funds, but recovered slightly to -13% by the end of December 2022. As of right now, 2.25 years later, those bond funds have lost 11%.

Unless your desired allocation is more than 25% allocation to bonds, there is absolutely no reason to look at anything other than Series I Savings bonds in your portfolio.

The "drawback" if you want to call it, is that the "Bonds" will be in your TAXABLE account at Treasury Direct (they cannot be bought within a 401k plan or IRA). But it has zero impact on your taxes, since the interest on these I-bonds is tax-deferred up to 30 years.

Within your 403(b), split 35:35:30 between Vanguard Growth Index, Vanguard Value Index and Vanguard Developed Markets Index funds. All equities.
Topic Author
strikerz1
Posts: 3
Joined: Mon Apr 01, 2024 9:12 pm

Re: Help with mutual fund selection in LFG 403b

Post by strikerz1 »

Hi Lakpr, thanks for the advice! I am maxing out my retirement accounts and haven’t heard of I-bonds before. I’ll look into it!
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