401K Election Options

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101invest
Posts: 11
Joined: Fri Jan 11, 2019 10:58 pm

401K Election Options

Post by 101invest » Mon Feb 11, 2019 10:49 pm

Looking for feedback on which investments to use in my 401K. Looking for an asset allocation of 70/20/10 (US Stock / International Stock / Bonds). Does it make sense to continue with the same philosophy I use in my taxable account (low cost Index Funds)? Or is it better to use actively managed funds since I don't have to worry about tax efficiency in my 401K account? Hoping to get some feedback on the lengthy list below.

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1. I've heard a lot of positives regarding Contrafund but the ER is 0.74%. Is this the best option for my US Stock fund or better off with Total Market Index?

2. What is the best International fund?

3. How about the bond fund? US Bond Index?

Thecallofduty
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Joined: Sat Jan 19, 2019 10:59 am

Re: 401K Election Options

Post by Thecallofduty » Mon Feb 11, 2019 10:56 pm

You wanna think long term with the 401k and go with low expense options.

These would be my choices:

Fid us bond inx ER .03
Fid tot mkt ER.02
Fid intl indx .05
-thecallofduty

Cheryl604
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Joined: Sat May 24, 2014 12:24 pm

Re: 401K Election Options

Post by Cheryl604 » Tue Feb 12, 2019 5:10 am

Thecallofduty wrote:
Mon Feb 11, 2019 10:56 pm
You wanna think long term with the 401k and go with low expense options.

These would be my choices:

Fid us bond inx ER .03
Fid tot mkt ER.02
Fid intl indx .05
+1

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oldcomputerguy
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Location: In the middle of five acres of woods

Re: 401K Election Options

Post by oldcomputerguy » Tue Feb 12, 2019 6:06 am

101invest wrote:
Mon Feb 11, 2019 10:49 pm
Looking for feedback on which investments to use in my 401K. Looking for an asset allocation of 70/20/10 (US Stock / International Stock / Bonds). Does it make sense to continue with the same philosophy I use in my taxable account (low cost Index Funds)? Or is it better to use actively managed funds since I don't have to worry about tax efficiency in my 401K account?
No, it's not really. A tax-deferred account doesn't significantly* work better with active funds than would a taxable account. The main thing to remember is that active management, after fees, must and will (in the aggregate) underperform passive management. This is true whether the funds are in a taxable account, in a tax-deferred account such as a 401k, or in a Roth IRA.

The three index funds indicated by Thecallofduty above are what you want to go with.

*(I say "significantly" because there is an issue with trading costs and capital gain distributions in an active fund running up the total tax bill from the fund, but that's a minor factor. The main issue is the fees, i.e. the expense ratio. If you owned an actively-managed fund in your 401k, the higher fees of the fund would swamp any possible tax advantage from holding the fund in the 401k.)
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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ruralavalon
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Re: 401K Election Options

Post by ruralavalon » Tue Feb 12, 2019 8:26 am

Cheryl604 wrote:
Tue Feb 12, 2019 5:10 am
Thecallofduty wrote:
Mon Feb 11, 2019 10:56 pm
You wanna think long term with the 401k and go with low expense options.

These would be my choices:

Fid us bond inx ER .03
Fid tot mkt ER.02
Fid intl indx .05
+1
+ 2. Those are the better funds to use in my opinion.

You are fortunate to have such excellent funds offered in your 401k.

101invest wrote:Does it make sense to continue with the same philosophy I use in my taxable account (low cost Index Funds)? Or is it better to use actively managed funds since I don't have to worry about tax efficiency in my 401K account? Hoping to get some feedback on the lengthy list below.
No, in any type of account it makes sense to use the low expense ratio index funds.

Low expenses beat high expenses, and index funds usually outperform actively managed funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
101invest
Posts: 11
Joined: Fri Jan 11, 2019 10:58 pm

Re: 401K Election Options

Post by 101invest » Tue Feb 12, 2019 11:18 am

Thanks everyone for the feedback. I thought I would find some Contrafund lovers out there but it's nice to see a consistent message. What are your thoughts on the International Index fund I have available in my 401K (Fidelity International Index Fund - FSPSX). The standard Three-fund portfolio uses Fidelity Total International Index Fund (FTIHX). Is this a much better option? From what I've read it looks like it's fairly new (2016) and provides broader exposure.

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ruralavalon
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Location: Illinois

Re: 401K Election Options

Post by ruralavalon » Tue Feb 12, 2019 11:36 am

101invest wrote:
Tue Feb 12, 2019 11:18 am
Thanks everyone for the feedback. I thought I would find some Contrafund lovers out there but it's nice to see a consistent message. What are your thoughts on the International Index fund I have available in my 401K (Fidelity International Index Fund - FSPSX). The standard Three-fund portfolio uses Fidelity Total International Index Fund (FTIHX). Is this a much better option? From what I've read it looks like it's fairly new (2016) and provides broader exposure.
Fidelity International Index Fund (FSPSX) invests in stocks of larger companies only in developed markets. So it is less diversified than Fidelity Total International Stock Index Fund (FTIHX), which invests in stocks of both larger and smaller companies in both developed and emerging markets.

Still Fidelity International Index Fund (FSPSX) is a good investment in a 401k which lacks a total international stock index fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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