Help with 401k Fund Selection for Small Business

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financeidiot
Posts: 121
Joined: Sat Dec 24, 2016 12:10 pm

Help with 401k Fund Selection for Small Business

Post by financeidiot » Fri Oct 06, 2017 11:14 am

Thank you in advance for your help! I'd like to request our company tweak our 401k fund selection and would love some feedback from the group as to what is missing or what should be removed.

About our company:
  • 30ish people
  • Age range of 24 - 60, average age of 40
  • Many employees elect not to participate (even for matching)
  • Most participants prefer target date funds
  • Whatever changes I recommend for the 401k plan will most likely happen
Here are the funds we currently have:
Mixed Funds:
  • Vanguard Target Date Retirement Funds
  • Vanguard Retirement Income
Bond Funds:
  • Vanguard Federal Money Market Investor Shares
  • Vanguard Short-Term Bond Index Admiral
  • Vanguard Intermediate-Term Bond Index Admiral
  • Vanguard Total Bond Index Admiral
  • Vanguard Total International Bond Index Admiral
Equities:
  • Vanguard Total Stock Market Index Admiral
  • Vanguard Extended Mkt Index Admiral
  • Vanguard 500 Index Admiral
  • Vanguard Growth Index Admiral
  • Vanguard Value Index Adm
  • Vanguard Balanced Index Fund Adm
  • Vanguard Mid Cap Index Admiral
  • Vanguard Mid-Cap Growth Index Admiral
  • Vanguard Mid-Cap Value Index Admiral
  • Vanguard Small Cap Index Admiral
  • Vanguard Small Cap Growth Index Admiral
  • Vanguard Small Cap Value Index Admiral
  • Vanguard Total International Stock Market Index Admiral
  • Vanguard Emerging Markets Index Admiral
  • Vanguard Developed Markets Index Admiral
  • Vanguard Precious Metals and Mining Investor Shares
  • Vanguard REIT Index Admiral
Here are the funds I'm proposing we add and why:
  • Vanguard Long-term Bond Index Admiral - Allow for slice and dice approach to bonds
  • Vanguard High-Yield Corporate Bond Index Admiral - Hard to get admiral shares outside of a 401k plan
  • Vanguard Inflation-Protected Securities Fund Admiral - Allow for inflation-protected bond selection
  • Vanguard International Small Cap Value Fund Admiral - Would be great to support small-cap value investing, not absolutely necessary

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ruralavalon
Posts: 11305
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Help with 401k Fund Selection for Small Business

Post by ruralavalon » Fri Oct 06, 2017 5:00 pm

In my opinion there are already too many funds offered for a 401k. The 401k already offers 19 funds plus the money market fund and target retirement series.

I believe there is research indicating that a large number of fund choices induces confusion and hesitation to invest.

My own idea of a good 401k would be one offering:
A money market fund;
A target date series;
Perhaps a balanced fund;
Vanguard Total Stock Market Index Fund;
Vanguard Total International Stock Index Fund;
Vanguard Total Bond Market Index Fund, or another intermediate-term bond index fund; and
Vanguard REIT Index Fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

billfromct
Posts: 482
Joined: Tue Dec 03, 2013 9:05 am

Re: Help with 401k Fund Selection for Small Business

Post by billfromct » Fri Oct 06, 2017 5:54 pm

I don't think Vanguard has an International Small Cap Value Fund. I looked on the Vanguard website but couldn't find it. Maybe I didn't look in the right place.

I think the closest would be FTSE All World ex-US Small Cap Index & the International Explorer Fund, but both do not have a value tilt. There is the International Value Fund, but that is large cap with a median market cap of $35.3B.

What is the ticker of the Vanguard International Small Cap Value Fund?

bill

financeidiot
Posts: 121
Joined: Sat Dec 24, 2016 12:10 pm

Re: Help with 401k Fund Selection for Small Business

Post by financeidiot » Fri Oct 06, 2017 10:15 pm

billfromct wrote:
Fri Oct 06, 2017 5:54 pm
I don't think Vanguard has an International Small Cap Value Fund. I looked on the Vanguard website but couldn't find it. Maybe I didn't look in the right place.

I think the closest would be FTSE All World ex-US Small Cap Index & the International Explorer Fund, but both do not have a value tilt. There is the International Value Fund, but that is large cap with a median market cap of $35.3B.

What is the ticker of the Vanguard International Small Cap Value Fund?

bill
You're right, it's just international small cap:
Vanguard FTSE All-World ex-US Small-Cap Index Fund Investor Shares (VFSVX) or Vanguard FTSE All-World ex-US Small-Cap ETF (VSS).

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BL
Posts: 7251
Joined: Sun Mar 01, 2009 2:28 pm

Re: Help with 401k Fund Selection for Small Business

Post by BL » Sat Oct 07, 2017 2:32 pm

ruralavalon wrote:
Fri Oct 06, 2017 5:00 pm
In my opinion there are already too many funds offered for a 401k. The 401k already offers 19 funds plus the money market fund and target retirement series.

I believe there is research indicating that a large number of fund choices induces confusion and hesitation to invest.

My own idea of a good 401k would be one offering:
A money market fund;
A target date series;
Perhaps a balanced fund;
Vanguard Total Stock Market Index Fund;
Vanguard Total International Stock Index Fund;
Vanguard Total Bond Market Index Fund, or another intermediate-term bond index fund; and
Vanguard REIT Index Fund.
+1

retiredjg
Posts: 30350
Joined: Thu Jan 10, 2008 12:56 pm

Re: Help with 401k Fund Selection for Small Business

Post by retiredjg » Sat Oct 07, 2017 2:42 pm

ruralavalon wrote:
Fri Oct 06, 2017 5:00 pm
In my opinion there are already too many funds offered for a 401k. The 401k already offers 19 funds plus the money market fund and target retirement series.

I believe there is research indicating that a large number of fund choices induces confusion and hesitation to invest.

My own idea of a good 401k would be one offering:
A money market fund;
A target date series;
Perhaps a balanced fund;
Vanguard Total Stock Market Index Fund;
Vanguard Total International Stock Index Fund;
Vanguard Total Bond Market Index Fund, or another intermediate-term bond index fund; and
Vanguard REIT Index Fund.
As frequently happens, I agree with ruralavalon. The list you have is baffling to the average investor. Could contribute to your low participation.

I would change the Total Stock to 500 index and Extended Market though.

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