Should my g/f keep her lower cost funds? Or get one with a better asset mix?

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Mark2614
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Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by Mark2614 » Thu Sep 14, 2017 11:06 am

She is employed and has a 401k with Fidelity. Balance is still under 10K, so nothing significant yet, but I still want to get her started on the right foot.

Age 29. She should be closer to 90/10 stocks/bonds.

Should she keep Vanguard Wellington Fund Admiral Shares (VWENX) with a low 0.16% expense ratio? Her employer selected that by default. The problem is that it's 2/3 stocks and 1/3 bonds. A few too many bonds for her young age. Is she better off getting a 2050 Lifecycle fund with Fidelity and paying 0.75% expense ratio but getting closer to that desired 90/10 asset allocation? Or keeping the 0.16% fund with more bonds?

Grt2bOutdoors
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by Grt2bOutdoors » Thu Sep 14, 2017 11:16 am

Mark2614 wrote:
Thu Sep 14, 2017 11:06 am
She is employed and has a 401k with Fidelity. Balance is still under 10K, so nothing significant yet, but I still want to get her started on the right foot.

Age 29. She should be closer to 90/10 stocks/bonds.
Should she? See my signature - one should invest based on need, ability and willingness. Does she meet all three criteria, or are you using your own need, ability and willingness to cloud the asset allocation decision?

Should she keep Vanguard Wellington Fund Admiral Shares (VWENX) with a low 0.16% expense ratio? Her employer selected that by default. The problem is that it's 2/3 stocks and 1/3 bonds. A few too many bonds for her young age. Is she better off getting a 2050 Lifecycle fund with Fidelity and paying 0.75% expense ratio but getting closer to that desired 90/10 asset allocation? Or keeping the 0.16% fund with more bonds?
What is most important is need, ability and willingness. Does she understand the risks involved, it's much more than just potential to accumulate less over time, there is a much greater risk that she gets spooked during a market downturn and places all of her money in a cash account or bond fund. The benefit of a balanced fund is that there is potential for growth and reduced volatility of returns. Not saying that is the optimum choice for all, but it may be a good compromise to keep all participants in the plan who have analysis paralysis fully invested with no extra effort on their part.

Has your girlfriend read the wiki? Created an Investment Policy Statement? Read some books? How about reading this short primer which the author basically suggests a 65-70% equity allocation with the remainder in fixed income? https://www.etf.com/docs/IfYouCan.pdf
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Mark2614
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by Mark2614 » Thu Sep 14, 2017 11:25 am

I just realized that her Fidelity plan lets her select any Vanguard fund (they must have some kind of deal). It gives all the Vanguard target date funds as "default" options to choose with just 0.16% expense ratio on all of them.

I could put her into the 2050 fund which is closer to her target date than the "balanced" fund. She doesn't pay attention to it. She will not panic sell or log-in and change it. If I select the 2050 fund she will let it ride for 30+ years. I think that will be best.

John Laurens
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by John Laurens » Thu Sep 14, 2017 11:34 am

If I was dating a girl, I would discuss general views of debt, spending, and saving. I would save AA, ER, and other minutiae until "I put a ring on it"

Regards,
John

Dottie57
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by Dottie57 » Thu Sep 14, 2017 11:38 am

John Laurens wrote:
Thu Sep 14, 2017 11:34 am
If I was dating a girl, I would discuss general views of debt, spending, and saving. I would save AA, ER, and other minutiae until "I put a ring on it"

Regards,
John
Agree. General money-life discussions first. Of course I think the simplicity of a target date fund is good.

Mark2614
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by Mark2614 » Thu Sep 14, 2017 11:41 am

John Laurens wrote:
Thu Sep 14, 2017 11:34 am
If I was dating a girl, I would discuss general views of debt, spending, and saving. I would save AA, ER, and other minutiae until "I put a ring on it"

Regards,
John
She just knows nothing about this stuff so she asked for my "help." I want to keep it simple and figured a target date fund would be good. Once selected, she won't pay any attention to it or change it anytime soon.

goingup
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by goingup » Thu Sep 14, 2017 11:46 am

Mark2614 wrote:
Thu Sep 14, 2017 11:25 am
If I select the 2050 fund she will let it ride for 30+ years. I think that will be best.
I agree. The TR fund is a better choice. The more important thing is saving enough. Saving 15% would be a good goal.

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ruralavalon
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Re: Should my g/f keep her lower cost funds? Or get one with a better asset mix?

Post by ruralavalon » Thu Sep 14, 2017 11:47 am

Mark2614 wrote:
Thu Sep 14, 2017 11:06 am
She is employed and has a 401k with Fidelity. Balance is still under 10K, so nothing significant yet, but I still want to get her started on the right foot.

Age 29. She should be closer to 90/10 stocks/bonds.

Should she keep Vanguard Wellington Fund Admiral Shares (VWENX) with a low 0.16% expense ratio? Her employer selected that by default. The problem is that it's 2/3 stocks and 1/3 bonds. A few too many bonds for her young age. Is she better off getting a 2050 Lifecycle fund with Fidelity and paying 0.75% expense ratio but getting closer to that desired 90/10 asset allocation? Or keeping the 0.16% fund with more bonds?
Vanguard Wellington Fund Admiral Shares (VWENX) ER 0.16% is a reasonable default choice in a 401k, and in my opinion the asset allocation is within the range of what is reasonable for age 29.

The more important point is that she contribute as much as practical for her, striving for 10-15%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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