VFIAX or TRRNX for my new 401(k)

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Topic Author
Yaris-3516
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Joined: Sun Dec 03, 2023 8:44 pm

VFIAX or TRRNX for my new 401(k)

Post by Yaris-3516 »

T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
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retired@50
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Re: VFIAX or TRRNX for my new 401(k)

Post by retired@50 »

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
So this is a new 401k. Do you have an old 401k?

Can you hold some bond funds and international stock index funds in another account?

If so, you could use the new 401k for the US stock component (VFIAX) of your investments.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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sycamore
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Re: VFIAX or TRRNX for my new 401(k)

Post by sycamore »

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.
...
Backtesting is hard. Did you account for:

A) TRRNX not using a static asset allocation for those 17 years? If you're looking at the TRRNX's current asset allocation (as of 2024), that doesn't mean that's was its AA all those 17 years. For example, look at the equity allocation percentages since 2020, per Morningstar
Image


B) TRRNX holding TRP's actively managed funds, which themselves typically are not "pure" exposure to certain sub asset classes comparable to VV, VB, VO? TRP's fund may increase or decrease allocation to cash, or adjust average duration in their bond funds for example. Maybe they were able to side step some of the bond fund losses in since 2021?

So yeah it's entirely possible TRP did a good job limiting downside exposure over the 17 year period. Was it worth the 0.60% expense ratio? So far, yes, but will it continue to do so? Who knows.

I'd go with the index funds and take the sure 0.60% savings, and avoid the worries that come with active management.
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ruralavalon
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Re: VFIAX or TRRNX for my new 401(k)

Post by ruralavalon »

You are looking at two good choices.

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
T. Rowe Price Retirement Funds are good funds. Morningstar, The Best Target-Date Funds for 2024. Their benefit here is broad diversification with an all-in-one simplicity. I do highly value simplicity. The expense ratio is highish by Boglehead standards, but average compared to other funds of this type.

My default preference is a good index fund over a good actively managed fund, so in general would suggest Vanguard 500 Index Fund (VFIAX).

More information would be helpful. It's often best to treat all accounts together as a single unified portfolio, rather than view each account separately.

What other funds are offered in the new 401k plan? Will you rollover an old 401k into the new 401k? Do you have other accounts, and what funds do you use in the other accounts? Please give fund names, tickers and expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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jeffyscott
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Re: VFIAX or TRRNX for my new 401(k)

Post by jeffyscott »

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm Strange, it’s like the .6% difference wasn’t there.
I think T. Rowe Price fund managers do a pretty good job of earning at least some of their management fees. In the 1990s we started there for a few reasons, one of which was their relatively low expense ratios for managed funds. However, I have been disappointed with their apparent desire to pretend like it's still the year 2000 or so, when an ER of 0.6-0.7% or so could be considered low, instead of just average.

My spouse's employer account was with them. When she retired and the account was rolled over, we gradually moved out of almost all the T. Rowe funds. The only one we are keeping is Capital Appreciation, we were able to get that moved that to the lower cost I shares (TRAIX).

If you want to compare a static mix of manged T. Rowe funds to a comparable mix of index funds, you might look at the spectrum funds. While those might not be available to you , it would make it easier to do a comparison. I don't know if the mix of funds used for those is similar to the Target or Retirement funds.

We had PRSIX and I was somewhat tempted to keep it. I'd have been a little more tempted with a lower ER. I see it's now been jacked up to 0.67%. I'd thought T. Rowe had been gradually, but too slowly, lowering expenses but appears that they have reversed course on even that. I guess this is probably related to their creation of the I-class shares, lower expenses for those means higher for the investor class.

(T. Rowe, your naming of share classes is terrible with one class called "I" and the other called "Investor".)
Topic Author
Yaris-3516
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Joined: Sun Dec 03, 2023 8:44 pm

Re: VFIAX or TRRNX for my new 401(k)

Post by Yaris-3516 »

sycamore wrote: Tue Jun 11, 2024 7:18 am
Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.
...
Backtesting is hard. Did you account for:

A) TRRNX not using a static asset allocation for those 17 years? If you're looking at the TRRNX's current asset allocation (as of 2024), that doesn't mean that's was its AA all those 17 years. For example, look at the equity allocation percentages since 2020, per Morningstar
Image


B) TRRNX holding TRP's actively managed funds, which themselves typically are not "pure" exposure to certain sub asset classes comparable to VV, VB, VO? TRP's fund may increase or decrease allocation to cash, or adjust average duration in their bond funds for example. Maybe they were able to side step some of the bond fund losses in since 2021?

So yeah it's entirely possible TRP did a good job limiting downside exposure over the 17 year period. Was it worth the 0.60% expense ratio? So far, yes, but will it continue to do so? Who knows.

I'd go with the index funds and take the sure 0.60% savings, and avoid the worries that come with active management.
Nope those details are more work than I care to do for backtesting.

Considering this is a new 401k and will, for a while, be a low amount of my total, it probably won’t matter which I pick so I’ll probably stick with the VFIAX that I already picked, and like you said take the definite 0.6% savings.
Topic Author
Yaris-3516
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Re: VFIAX or TRRNX for my new 401(k)

Post by Yaris-3516 »

ruralavalon wrote: Tue Jun 11, 2024 8:09 am You are looking at two good choices.

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
T. Rowe Price Retirement Funds are good funds. Morningstar, The Best Target-Date Funds for 2024. Their benefit here is broad diversification with an all-in-one simplicity. I do highly value simplicity. The expense ratio is highish by Boglehead standards, but average compared to other funds of this type.

My default preference is a good index fund over a good actively managed fund, so in general would suggest Vanguard 500 Index Fund (VFIAX).

More information would be helpful. It's often best to treat all accounts together as a single unified portfolio, rather than view each account separately.

What other funds are offered in the new 401k plan? Will you rollover an old 401k into the new 401k? Do you have other accounts, and what funds do you use in the other accounts? Please give fund names, tickers and expense ratios.
I might make a separate post with all the funds, but since this one has a higher plan fee than my old one, I’ll probably roll the current one into the old one when leaving the company.
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retired@50
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Re: VFIAX or TRRNX for my new 401(k)

Post by retired@50 »

Yaris-3516 wrote: Tue Jun 11, 2024 10:21 am
ruralavalon wrote: Tue Jun 11, 2024 8:09 am You are looking at two good choices.

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
T. Rowe Price Retirement Funds are good funds. Morningstar, The Best Target-Date Funds for 2024. Their benefit here is broad diversification with an all-in-one simplicity. I do highly value simplicity. The expense ratio is highish by Boglehead standards, but average compared to other funds of this type.

My default preference is a good index fund over a good actively managed fund, so in general would suggest Vanguard 500 Index Fund (VFIAX).

More information would be helpful. It's often best to treat all accounts together as a single unified portfolio, rather than view each account separately.

What other funds are offered in the new 401k plan? Will you rollover an old 401k into the new 401k? Do you have other accounts, and what funds do you use in the other accounts? Please give fund names, tickers and expense ratios.
I might make a separate post with all the funds, but since this one has a higher plan fee than my old one, I’ll probably roll the current one into the old one when leaving the company.
Unless your "old one" is the Thrift Savings Plan, I suspect the old plan may not be willing to take a rollover into the account of a former employee.

I hope I'm wrong, for your sake.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
Yaris-3516
Posts: 19
Joined: Sun Dec 03, 2023 8:44 pm

Re: VFIAX or TRRNX for my new 401(k)

Post by Yaris-3516 »

retired@50 wrote: Tue Jun 11, 2024 10:26 am
Yaris-3516 wrote: Tue Jun 11, 2024 10:21 am
ruralavalon wrote: Tue Jun 11, 2024 8:09 am You are looking at two good choices.

Yaris-3516 wrote: Mon Jun 10, 2024 6:44 pm T Rowe’s 2055 TDF has the diversification that I prefer but has a 0.64% ER vs VFIAX’s 0.04%.

However when I backtested it versus an equivalent mix of Vanguard funds (VV, VB, VO, etc) they were almost neck and neck, like 0.04% CAGR difference over 17 years.

Strange, it’s like the .6% difference wasn’t there.

The other funds aren’t appealing to me tbh.
T. Rowe Price Retirement Funds are good funds. Morningstar, The Best Target-Date Funds for 2024. Their benefit here is broad diversification with an all-in-one simplicity. I do highly value simplicity. The expense ratio is highish by Boglehead standards, but average compared to other funds of this type.

My default preference is a good index fund over a good actively managed fund, so in general would suggest Vanguard 500 Index Fund (VFIAX).

More information would be helpful. It's often best to treat all accounts together as a single unified portfolio, rather than view each account separately.

What other funds are offered in the new 401k plan? Will you rollover an old 401k into the new 401k? Do you have other accounts, and what funds do you use in the other accounts? Please give fund names, tickers and expense ratios.
I might make a separate post with all the funds, but since this one has a higher plan fee than my old one, I’ll probably roll the current one into the old one when leaving the company.
Unless your "old one" is the Thrift Savings Plan, I suspect the old plan may not be willing to take a rollover into the account of a former employee.

I hope I'm wrong, for your sake.

Regards,
Oh…to be fair I’ve never heard of a 401k rollover to a former one, only the former one to the current one.
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