What to invest 401k in?

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GeorgePatton
Posts: 5
Joined: Wed Jul 11, 2018 6:00 pm

What to invest 401k in?

Post by GeorgePatton » Wed Jul 11, 2018 6:06 pm

Before I had a target date fund that I picked through my work's 401k. It didnt seem to generate that much income. I picked a 5 separate funds which seemed to be doing bettter. They are:

US Bonds Index C: 10%
RERGX: AF EUROPAC GROWTH R6: 20%
VIIX: VANG INST INDEX PLUS: 30%
VMCPX: VANG MD CP IDX IS PL: 20%
VSCPX: VANG SM CP IDX IS PL: 20%

Is this a good mix of funds for my 401k? I currently have 40k distributed between the funds. I'm currently 34. Should I be more aggressive and not have anything in bonds yet?
Last edited by GeorgePatton on Wed Jul 11, 2018 10:41 pm, edited 1 time in total.

Grt2bOutdoors
Posts: 19083
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What to invest 401k in?

Post by Grt2bOutdoors » Wed Jul 11, 2018 7:44 pm

GeorgePatton wrote:
Wed Jul 11, 2018 6:06 pm
Before I had a target date fund that I picked through my work's 401k. It didnt seem to generate that much income. I picked a 4 separate funds which seemed to be doing bettter. They are:

US Bonds Index C: 10%
RERGX: AF EUROPAC GROWTH R6: 20%
VIIX: VANG INST INDEX PLUS: 30%
VMCPX: VANG MD CP IDX IS PL: 20%
VSCPX: VANG SM CP IDX IS PL: 20%

Is this a good mix of funds for my 401k? I currently have 40k distributed between the funds. I'm currently 34. Should I be more aggressive and not have anything in bonds yet?
Are those your total investments? If you fill out your question in the format shown in my signature link, you'll get a better answer.
You should not look at your 401k to generate income, rather you want to earn a total return over your investment period. Some years, your total return will be negative, as the market does not go up in a straight line. That's a fairly aggressive portfolio you show above, I'd hold at least 10% in fixed income.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

ExitStageLeft
Posts: 814
Joined: Sat Jan 20, 2018 4:02 pm

Re: What to invest 401k in?

Post by ExitStageLeft » Wed Jul 11, 2018 8:46 pm

Welcome to the forum. It looks like a nice collection of funds you have currently. One way to make sure you hang onto your hard earned savings is to keep the costs of your funds low. Do you have the expense ratios or other fees that your 401k plan charges?

Flyer24
Posts: 217
Joined: Sun Apr 08, 2018 4:21 pm

Re: What to invest 401k in?

Post by Flyer24 » Wed Jul 11, 2018 8:55 pm

At your age, it is about accumulating shares and maximizing saving. Don’t let the return be your focus. You want to dollar cost average in index funds.

averagedude
Posts: 176
Joined: Sun May 13, 2018 3:41 pm

Re: What to invest 401k in?

Post by averagedude » Wed Jul 11, 2018 9:03 pm

These fund choices are reasonable selections. The only thing i personally don't like about it is it is leaving out emerging market equities and stocks in the pacific region. These selections has some tilts to small and mid size companies, but should do ok for a young investor like yourself. I would gamble that these selections would outperform the three fund portfolio in the long term. Although outperforming or underperforming, i would say the difference is less than 1 percent. Don't underestimate the power of 1 percent though over a 35 year time horizon.
Last edited by averagedude on Wed Jul 11, 2018 10:23 pm, edited 2 times in total.

GeorgePatton
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Joined: Wed Jul 11, 2018 6:00 pm

Re: What to invest 401k in?

Post by GeorgePatton » Wed Jul 11, 2018 10:09 pm

ExitStageLeft wrote:
Wed Jul 11, 2018 8:46 pm
Welcome to the forum. It looks like a nice collection of funds you have currently. One way to make sure you hang onto your hard earned savings is to keep the costs of your funds low. Do you have the expense ratios or other fees that your 401k plan charges?
Hi, thanks! Sure, I will post those.

VIIX is 0.02%
VMCPX is 0.03%
VSCPX is 0.03%
RERGX is 0.49%
US bonds index C is 0.052%
averagedude wrote:
Wed Jul 11, 2018 9:03 pm
These fund choices are reasonable selections. The only thing i personally don't like about it is it is leaving out emerging market equities and stocks in the pacific region. These selections has some tilts to small and mid size companies, but should do ok for a young investor like yourself. I would gamble that these selections would outperform the three fund portfolio in the long term. Although outperforming or underperforming, i would say the difference is less than 1 percent. Don't underestimate the power of 1 percent though over a 35 year time horizon.
i have 20% in RERGX which is emerging markets in the pacific i think.

jacoavlu
Posts: 498
Joined: Sun Jan 06, 2013 12:06 pm

Re: What to invest 401k in?

Post by jacoavlu » Wed Jul 11, 2018 10:16 pm

Are there other international funds available in your plan, and if so, what are they and what are their expense ratios?

GeorgePatton
Posts: 5
Joined: Wed Jul 11, 2018 6:00 pm

Re: What to invest 401k in?

Post by GeorgePatton » Wed Jul 11, 2018 10:19 pm

jacoavlu wrote:
Wed Jul 11, 2018 10:16 pm
Are there other international funds available in your plan, and if so, what are they and what are their expense ratios?
ya theres 2 other funds for overseas

State Street Global Equity ex U.S. Index Non-Lending Series Fund Class C: expensive ratio 0.16%

Aberdeen Emerging Markets Fund Institutional Class: 1.13% expense ratio ABEMX

averagedude
Posts: 176
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Re: What to invest 401k in?

Post by averagedude » Wed Jul 11, 2018 10:26 pm

averagedude wrote:
Wed Jul 11, 2018 9:03 pm
These fund choices are reasonable selections. The only thing i personally don't like about it is it is leaving out emerging market equities and stocks in the pacific region. These selections has some tilts to small and mid size companies, but should do ok for a young investor like yourself. I would gamble that these selections would outperform the three fund portfolio in the long term. Although outperforming or underperforming, i would say the difference is less than 1 percent. Don't underestimate the power of 1 percent though over a 35 year time horizon.
i have 20% in RERGX which is emerging markets in the pacific i think.
[/quote]

I stand corrected. I failed to research RERGX. It does contain emerging markets and stocks in the pacific region. Your portfolio is well diversified and you have good fund choices for your situation.

GeorgePatton
Posts: 5
Joined: Wed Jul 11, 2018 6:00 pm

Re: What to invest 401k in?

Post by GeorgePatton » Wed Jul 11, 2018 10:42 pm

averagedude wrote:
Wed Jul 11, 2018 10:26 pm
averagedude wrote:
Wed Jul 11, 2018 9:03 pm
These fund choices are reasonable selections. The only thing i personally don't like about it is it is leaving out emerging market equities and stocks in the pacific region. These selections has some tilts to small and mid size companies, but should do ok for a young investor like yourself. I would gamble that these selections would outperform the three fund portfolio in the long term. Although outperforming or underperforming, i would say the difference is less than 1 percent. Don't underestimate the power of 1 percent though over a 35 year time horizon.
i have 20% in RERGX which is emerging markets in the pacific i think.
I stand corrected. I failed to research RERGX. It does contain emerging markets and stocks in the pacific region. Your portfolio is well diversified and you have good fund choices for your situation.
[/quote]

No problem! One thing im wondering is if i should take the money out of bonds and maybe do like 30% emerging markets?
Grt2bOutdoors wrote:
Wed Jul 11, 2018 7:44 pm
GeorgePatton wrote:
Wed Jul 11, 2018 6:06 pm
Before I had a target date fund that I picked through my work's 401k. It didnt seem to generate that much income. I picked a 4 separate funds which seemed to be doing bettter. They are:

US Bonds Index C: 10%
RERGX: AF EUROPAC GROWTH R6: 20%
VIIX: VANG INST INDEX PLUS: 30%
VMCPX: VANG MD CP IDX IS PL: 20%
VSCPX: VANG SM CP IDX IS PL: 20%

Is this a good mix of funds for my 401k? I currently have 40k distributed between the funds. I'm currently 34. Should I be more aggressive and not have anything in bonds yet?
Are those your total investments? If you fill out your question in the format shown in my signature link, you'll get a better answer.
You should not look at your 401k to generate income, rather you want to earn a total return over your investment period. Some years, your total return will be negative, as the market does not go up in a straight line. That's a fairly aggressive portfolio you show above, I'd hold at least 10% in fixed income.
I do also have 40k in stocks and then 4k from another 401k i forgot to move over so its a rollover IRA. I'm not too worried about the rollover IRA and im kinda just playing with it. so about 85k total.

Grt2bOutdoors
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Location: New York

Re: What to invest 401k in?

Post by Grt2bOutdoors » Thu Jul 12, 2018 6:11 am

Tax deferred accounts are very valuable space. I would not be “playing” with retirement monies. The time for playing is at retirement or after work, not while saving for it. Saving for retirement is serious business. If you must play, no more than 5% of it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

GeorgePatton
Posts: 5
Joined: Wed Jul 11, 2018 6:00 pm

Re: What to invest 401k in?

Post by GeorgePatton » Thu Jul 12, 2018 10:09 am

Grt2bOutdoors wrote:
Thu Jul 12, 2018 6:11 am
Tax deferred accounts are very valuable space. I would not be “playing” with retirement monies. The time for playing is at retirement or after work, not while saving for it. Saving for retirement is serious business. If you must play, no more than 5% of it.
I am sort of playing with the money but not really. The 4k I have in 3 different stocks. I have the majority of the money in FSTMX (3,600), 270 dollars in WTI and 115 dollars in Hormel which I should really take out.

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ruralavalon
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Location: Illinois

Re: What to invest 401k in?

Post by ruralavalon » Thu Jul 12, 2018 10:30 am

Welcome to the forum :) .

You have some very good funds offered in your 401k, you are fortunate.

GeorgePatton wrote:
Wed Jul 11, 2018 6:06 pm
Before I had a target date fund that I picked through my work's 401k. It didnt seem to generate that much income. I picked a 5 separate funds which seemed to be doing bettter. They are:

US Bonds Index C: 10%
RERGX: AF EUROPAC GROWTH R6: 20%
VIIX: VANG INST INDEX PLUS: 30%
VMCPX: VANG MD CP IDX IS PL: 20%
VSCPX: VANG SM CP IDX IS PL: 20%

Is this a good mix of funds for my 401k? I currently have 40k distributed between the funds. I'm currently 34. Should I be more aggressive and not have anything in bonds yet?
GeorgePatton wrote:
Wed Jul 11, 2018 10:09 pm
ExitStageLeft wrote:
Wed Jul 11, 2018 8:46 pm
Welcome to the forum. It looks like a nice collection of funds you have currently. One way to make sure you hang onto your hard earned savings is to keep the costs of your funds low. Do you have the expense ratios or other fees that your 401k plan charges?
Hi, thanks! Sure, I will post those.

VIIX is 0.02%
VMCPX is 0.03%
VSCPX is 0.03%
RERGX is 0.49%
US bonds index C is 0.052%
averagedude wrote:
Wed Jul 11, 2018 9:03 pm
These fund choices are reasonable selections. The only thing i personally don't like about it is it is leaving out emerging market equities and stocks in the pacific region. These selections has some tilts to small and mid size companies, but should do ok for a young investor like yourself. I would gamble that these selections would outperform the three fund portfolio in the long term. Although outperforming or underperforming, i would say the difference is less than 1 percent. Don't underestimate the power of 1 percent though over a 35 year time horizon.
i have 20% in RERGX which is emerging markets in the pacific i think.
GeorgePatton wrote:
Wed Jul 11, 2018 10:19 pm
jacoavlu wrote:
Wed Jul 11, 2018 10:16 pm
Are there other international funds available in your plan, and if so, what are they and what are their expense ratios?
ya theres 2 other funds for overseas

State Street Global Equity ex U.S. Index Non-Lending Series Fund Class C: expensive ratio 0.16%

Aberdeen Emerging Markets Fund Institutional Class: 1.13% expense ratio ABEMX
Of the funds you listed, in my opinion the better funds to consider using in your 401k include:
1) 60%, Vanguard Institutional Index Fund Institutional Plus (a S&P 500 index fund) (VIIIX) ER 0.02%;
2) 20%, SSgA Global Equity Ex-U.S. Non-lending class C, ER 0.16%; and
3) 20%, U.S. Bond Index C, ER 0.052%.

What is the full name of the fund "U.S. Bond Index C", and the name of the company operating that fund?

Do you have any other accounts, such as IRAs or taxable brokerage accounts? Where is your rollover IRA located, and what investments are in it?


Asset allocation.
At age 34 I suggest about 20 - 25% in bonds. This is expected to substantially reduce portfolio volatility (risk), with only a relatively slight decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page).

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.


Fund selection.
In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

It is often better coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited or choices available in a taxable account or any IRAs. This approach lets you avoid having to use sub-par funds often found in work-based accounts like 401ks.


Domestic stocks.
For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard Institutional Index Fund Institutional Plus, VIIIX, in your 401k) is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

If you want to add the small-cap fund, then an 82/18 mix of S&P 500 and small-cap will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market". In my opinion this is not necessary, it is optional if you prefer to do this.

To make portfolio management and rebalancing easy it’s usually helpful to have a one or more tax-advantaged accounts which contain all three basic asset types (bonds, international stocks, and domestic stocks).


International stocks.
American Funds EuroPacific Growth R6 (RERGX ) ER 0.49% is a good actively managed international stock fund. It is fairly well diversified, covering larger stocks in both developed and emerging markets, and has a moderate expense ratio.

SSgA Global Equity Ex-U.S. Non-lending class C, ER 0.16%, tracks the MSCI ACWI ex-USA Index. That index "captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 24 Emerging Markets (EM) countries*. With 2,154 constituents, the index covers approximately 85% of the global equity opportunity set outside the US." The fund has a lower expense ratio.

They are both good funds, my preference is for a good index fund over a good actively managed fund.
Last edited by ruralavalon on Thu Jul 12, 2018 11:02 am, edited 4 times in total.
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mhadden1
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Re: What to invest 401k in?

Post by mhadden1 » Thu Jul 12, 2018 10:38 am

GeorgePatton wrote:
Wed Jul 11, 2018 6:06 pm
Before I had a target date fund that I picked through my work's 401k. It didnt seem to generate that much income.
I like inexpensive Target Date funds, and particularly in tax-advantaged accounts where the bond interest they produce has no tax consequence. Apparently you don't mind taking on more risk by tilting strongly toward mid and small cap stocks. Maybe a Target Date fund like a 2055 or later would provide enough risk while allowing you forget about the details - all you would have to do is maintain your regular contributions.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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