My 401k is a MESS!

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Topic Author
Omni
Posts: 3
Joined: Tue Oct 02, 2007 10:34 am

My 401k is a MESS!

Post by Omni »

Hi all, I've been slightly ignoring my 401k for the last few years since it had always been fairly small and now that it's gotten a bit bigger (29k) I need a little help balancing it out. I'm 28 years old and I have no other retirement accounts, just the 401k.

Here are the options I have:
STABLE VALUE FUND (Collective Fund, 0.00%)
BOND INDEX FUND (Collective Fund, 0.028%)
CONSERVATIVE ALLOCATION FUND (NVCBX, 0.68%)
MODERATE BALANCED FUND (NVMBX, 0.72%)
GROWTH BALANCED FUND (NVGBX, 0.75%)
AGGRESSIVE ALLOCATION FUND (NWBEX, 0.79%)
ASSET ALLOCATION (Collective Fund, 0.00%)
DODGE & COX STOCK FUND (DODGX, 0.52%) 12.8%
S&P 500 INDEX FUND (Collective Fund, 0.014%) 16.0%
DIVERSIFIED EQUITY FUND (NVDEX, 0.79%)
CAPITAL GROWTH FUND (WFCDX, 0.74%) 11.2%
LARGE COMPANY GROWTH FUND (NVLCX, 0.74%)
S&P MIDCAP INDEX FUND (Collective Fund, 0.032%) 16.0%
DIVERSIFIED SMALL CAP FUND (NVDSX, 0.90%) 9.6%
EUROPACIFIC GROWTH FUND (RERFX, 0.57%) 9.6%
NASDAQ 100 INDEX FUND (Collective Fund, 0.078%) 6.6%
WELLS FARGO STOCK FUND (WFC, 0.00%)
WELLS FARGO STOCK (WFC, Match) 18.1%

Well I guess it's obvious who I work for! They match in company stock which is why so much is sitting there ($5,300) I can move it at will. I rebalanced awhile ago to move into the index funds since the fees were so low.

As far as my investment style, I tend to be ok with more risk for potentially more return, more towards the agressive/stock side side than conservative/income.

Long time lurker - Omni
x36900
Posts: 220
Joined: Fri Sep 21, 2007 12:47 pm
Location: Oklahoma City, OK

Hi, Omni,

Post by x36900 »

I haven't looked up the details to all the funds you have, but I have two quick comments.

First, you have no fixed-income at all. I think that is a mistake. There will be a bear market in stocks. In fact, over your career, there will probably be something like 10 bear markets in stocks; over your lifetime maybe something like 15 or more.

Thus, I'd suggest, since you wrote that you can move the match in Wells Fargo stock at will, taking that entire match, and moving it to the bond index fund. 18% or so in bonds ought to be a decent initial fixed-income allocation.

My second thought is, why bother holding both the NASDAQ 100 index and the S&P 500 Index? That makes no sense to me, because the NASDAQ 100 is already 100% (or close to it, anyway) included in the S&P 500. You've got an unnecessary overlap, with little to no diversification benefit. I'd move the money out of the NASDAQ 100 and into the S&P 500 index.

Anyway, I'll try to look at more details about the other funds. Best of luck,
Brian
xenial
Posts: 2720
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Post by xenial »

Omni, welcome to the Bogleheads Forum! Your 401(k) choices are much better than most. I'll throw out an example allocation, assuming your 401(k) represents your entire portfolio, i.e., you're doing no taxable investing.

BOND INDEX FUND 20%
S&P 500 INDEX FUND 35%
S&P MIDCAP INDEX FUND 10%
DIVERSIFIED SMALL CAP FUND 5%
EUROPACIFIC GROWTH FUND 30%

The overall expense ratio is 0.23%.

Best wishes,
Ken
Topic Author
Omni
Posts: 3
Joined: Tue Oct 02, 2007 10:34 am

Post by Omni »

Thanks for the responses, I didn't even realize those 2 indexes overlapped (shame on me!)

About the non-index collective funds:
Asset Allocation - 60% Stocks from the S&P 500, 40% Bonds from the Lehman Brother 20+ Treasury Bond Index. Active, defensive strategies, moves between 60/40, reinvests.

Stable Value - Preserve Principle/Adequate Liquidity/Returns Superior to Short Term Maturities. Actively managed, Primarily GIC's/BIC's with avg credit rating AA.
InvestingMom
Posts: 503
Joined: Mon Aug 20, 2007 2:45 pm

Check out fundadvice.com

Post by InvestingMom »

Check out this web site, fundadvice.com. On it you will see specific recommendations for select company 401ks including Wells Fargo. I am not advocating his recommendations but some of his information may be useful to you.

What strikes me is that you are invested in a lot of funds making it pretty difficult to track (as you have admitted.)

You need to first decide on your asset allocation plan, which means you need to decide how much to first allocate to bonds versus equities. Check out Laura's stickies at the top of the forum where she has posted quite a bit of advice. Once you do that you can move on to the next step of picking the right funds.

Please consider reading some of the books recommended on this site, they will be invaluable. Dont feel that you have to do all of the reading right away, but start soon!
x36900
Posts: 220
Joined: Fri Sep 21, 2007 12:47 pm
Location: Oklahoma City, OK

Ok, I checked up on the funds you're holding

Post by x36900 »

and used Morningstar's portfolio X-Ray to look into the biggest individual stock holdings within your funds.

Of the 30 largest individual stock holdings (which includes Wells Fargo as #1, in your case), 24 of the 30 are in the S&P 500, 21 of the 30 are in the Wells Fargo Capital Growth Fund (WFCDX), 11 of the 30 are in Dodge & Cox stock fund (DODGX), and 11 of the 30 are part of the NASDAQ 100.

More importantly, 15 of the 21 in WFCDX are also in the S&P 500 (71.4%),
10 of the 11 in DODGX are also in the S&P 500 (90.9%), and 8 of the 11 NASDAQ 100's are also in the S&P 500 (72.7%).

So, I want to echo the fine comments on previous posts about gathering information, and doing some reading to determine a good asset allocation for yourself.

After you've done that, look into dropping or adding funds as the case may be. But, I have a suggestion that you should consider when the time comes: think about dropping WFCDX, DODGX, and the NASDAQ 100. All 3 of those positions have significant overlap with the S&P 500 index, and thus I think that it isn't necessary to hold them.

My first suggestion still stands -- add some fixed income!

Combined with that suggestion I just made, I think you could do well with the bond index fund, the S&P 500 index fund, the S&P midcap index fund, Wells Fargo's Diversified Small Cap fund, and the Europacific Growth fund.

Which oddly enough, is just about a repeat of Ken's advice.

Best of luck!
Brian
InvestingMom
Posts: 503
Joined: Mon Aug 20, 2007 2:45 pm

A bit more

Post by InvestingMom »

I noted that the recommendation in fund advice is very similar to both Brian and Ken as well. The only difference is that Merriman (who is the author for fund advice) has a bent toward Value stocks. I too favor value, but you should read up more on this before you make a decision in favor of value.

But I wouldn't wait for the reading to make the changes as suggested by others already. You can always add Value funds (or anyother slice you decide you prefer) later. Many if not most on this board would recommend not slicing and dicing at all.
livesoft
Posts: 75116
Joined: Thu Mar 01, 2007 8:00 pm

Re: A bit more

Post by livesoft »

InvestingMom wrote:...
Many if not most on this board would recommend not slicing and dicing at all.
InvestingMom, I think a poll on this web site showed that most of the folks who responded are slice-and-dicers. :)
InvestingMom
Posts: 503
Joined: Mon Aug 20, 2007 2:45 pm

Interesting

Post by InvestingMom »

Interesting. I guess that mostly only the non-slicer/dicers then respond to the AA questions. Perhaps that is good because beginners might do better to not slice and dice until they get a bit of experience and do their reading....and of course no one would agree on how to slice and dice as it is a personal decision.
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MossySF
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Re: Interesting

Post by MossySF »

InvestingMom wrote:Interesting. I guess that mostly only the non-slicer/dicers then respond to the AA questions. Perhaps that is good because beginners might do better to not slice and dice until they get a bit of experience and do their reading....and of course no one would agree on how to slice and dice as it is a personal decision.
The slider-dicers here are still Diehards. I'm sure all of them looked at the expense ratio differences for the sub-classes and said "nah...simple is better".
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grabiner
Advisory Board
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Re: Interesting

Post by grabiner »

MossySF wrote:
InvestingMom wrote:Interesting. I guess that mostly only the non-slicer/dicers then respond to the AA questions. Perhaps that is good because beginners might do better to not slice and dice until they get a bit of experience and do their reading....and of course no one would agree on how to slice and dice as it is a personal decision.
The slider-dicers here are still Diehards. I'm sure all of them looked at the expense ratio differences for the sub-classes and said "nah...simple is better".
Both comments apply to me. I am a slice-and-dicer myself, but I won't recommend slicing and dicing to an investor seeking advice unless the investor expresses a preference for it. And for most investors trying to get the most out of the 401(k), the fund choices discourage slice-and-dicing; many plans have a low-cost S&P 500 index fund, but few plans have a low-cost small-cap value fund, and I don't think it is worth paying a high price for one.

The original poster, for example, has an S&P 500 index fund at 0.014%, which is the lowest cost I have seen, but his only small-cap fund is at 0.90%. I would suggest that he get his small-cap allocation in his IRA if he has room, where he could use either Small-Cap Value Index or Small-Cap Index.
Laura
Posts: 7975
Joined: Mon Feb 19, 2007 7:40 pm

Any other investments?

Post by Laura »

Omni,

Do you or a spouse have any other investments in a Roth, Traditional IRA, or taxable account? You would want to look at all of your investments together as one unified portfolio is you do.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
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