New 401K Portfolio Review & Suggestion

[fred2017]

Dear Bogleheads:

Just recently switched my employment with a new 401k account at Fidelity (decided not to rollover my old 401k accounts).
When talking about portfolio, one might need to look at all accounts overall. But I just want to treat this new 401k as individual one now for easy management and funds selection.

Currently I selected target 2040 retirement fund (the 1st one below) with expense ratio 0.29%.

I found 2-5 (no plan specific option) have very low expense ratio (0.02% to 0.04%). If I mimic VFORX (Vanguard Target Retirement 2040 Fund) as example, roughly as below by google the fund:

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap? I am unable to figure out and please help to advise.
Also please help to advise if the selection of low expense ratio funds, and the 46%/29%/25% portfolio are reasonable.

Thank you !


Name Benchmark Category Gross Expense Ratio Asset Class Plan-specific option
Various Principal Life Time HYBRID S&P Target Date N/A 0.29% Blended Investment Yes
FID 500 INDEX (FXAIX) S&P 500 Large Cap 0.02% Stock Investments No
FID MID CAP IDX (FSMDX) Russell MidCap Mid-Cap 0.03% Stock Investments No
FID SM CAP IDX (FSSNX) Russell 2000 Small Cap 0.03% Stock Investments No
FID INTL INDEX (FSPSX) MSCI EAFE (Net MA) International 0.04% Stock Investments No
FID US BOND IDX (FXNAX) BBg US Agg Bond Income 0.03% Bond Investments No

AB US LG CP GR CIT W Russell 1000 Growth Large Cap 0.37% Stock Investments Yes
COL DIVIDEND INC I3 (CDDYX) Russell 1000 Large Cap 0.55% Stock Investments Yes
HTFD CORE EQUITY R6 (HAITX) S&P 500 Large Cap 0.36% Stock Investments Yes
J H ENTERPRISE U Russell MidCap Growth Mid-Cap 0.48% Stock Investments Yes
VICTORY S EST VAL R6 (VEVRX) Russell MidCap Value Mid-Cap 0.54% Stock Investments Yes
TRP QM US SM-CP GR (PRDSX) MSCI US Sm Cap Gro Small Cap 0.80% Stock Investments No
VICTORY S SM CO OP I (VSOIX) Russell 2000 Value Small Cap 0.89% Stock Investments Yes
FID OVERSEAS K (FOSKX) MSCI EAFE (Net MA) International 0.59% Stock Investments Yes
PUTNAM STABLE VALUE ICE BA US 3-Mo Trea Bill Stable Value0.37% Bond Investments Yes
BLKRK CORE BOND K (CCBBX) BBg US Agg Bond Income 0.44% Bond Investments Yes

[billfromct]

You could google, “approximating total stock market” & the bogleheads website has an article on the market cap of the total stock market index by “style box”.

The style box does not add up to 100% for the Vanguard/Fidelity Total Stock Market Index Fund, updated in June 2024:
-large cap 71%
-mid cap 20%
-small cap 8%
-Total 99%

I guess the bogleheads hand held calculator does not have the “rounding” feature.

There is also a style box for the Fidelity Zero Total Market Index, last updated in 2021.

bill

[HomeStretch]

For simplicity in your 401k, consider holding just FXAIX 500 fund as it has a high % overlap with FSKAX Fidelity US total stock market fund.

If you want to add mid cap/small cap funds, per the section “Approximating Total Stock Market with 3 Funds” in the BH wiki page “Approximating Total Stock Market (TSM)” linked below, the following are the % to use to approximate Fidelity US TSM fund FSKAX:
83% FXAIX Fidelity 500 fund
8% FSMDX Fidelity Mid cap index fund
9% FSSNX Fidelity Small cap index fund

The % above are dated 5/31/21 and differ from the % in the prior post taken from the page’s section “Total stock market index” dated 6/30/24. Not sure why the %s in the two wiki page sections are different (aside from the dates) but the difference was significant enough that I wanted to point it out.

https://www.bogleheads.org/wiki/Approxi ... ock_market

[retired@50]

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap?

In this case, I'd suggest 46/0/0.

Regards,

[ruralavalon]

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap?

In this case, I'd suggest 46/0/0.

Regards,

I agree.

In my opinion a S&P 500 index fund is good enough by itself for investing in U.S. stocks, it covers 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 30+ years since the creation of the first total stock market index fund the two types of funds have had almost identical performance.

Some years one fund type was a little bit ahead, other years the other fund type was a little bit ahead. I would not bother adding another U.S. stock fund trying to better mimic a total stock market index fund.

[fred2017]

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap?

In this case, I'd suggest 46/0/0.

Regards,

I agree.

In my opinion a S&P 500 index fund is good enough by itself for investing in U.S. stocks, it covers 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 30+ years since the creation of the first total stock market index fund the two types of funds have had almost identical performance.

Some years one fund type was a little bit ahead, other years the other fund type was a little bit ahead. I would not bother adding another U.S. stock fund trying to better mimic a total stock market index fund.

Thank you both. I took the suggestion and made the selection today.

By the way, I checked all my 401k retirements accounts today and the overall portfolio from the balance as today is:

- US stock: 56%
- International stock: 15%
- Bond (including cash):29%

Is the bond% too high? I currently have personal brokerage account (taxable account) at Vanguard with some free cash uninvested (sit in the settlement fund), maybe I can invest in some Vanguard funds (e.g. Vanguard S&P-500 fund (VFIAX or VOO) or Vanguard Total Stock Market Fund (VTSAX or VTI)) to reduce the overall bond ratio a little bit, even add some Vanguard international fund to increase international stock ratio a little bit?
Any good suggestion? Thanks.

[BitTooAggressive]

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap?

In this case, I'd suggest 46/0/0.

Regards,

I agree.

In my opinion a S&P 500 index fund is good enough by itself for investing in U.S. stocks, it covers 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 30+ years since the creation of the first total stock market index fund the two types of funds have had almost identical performance.

Some years one fund type was a little bit ahead, other years the other fund type was a little bit ahead. I would not bother adding another U.S. stock fund trying to better mimic a total stock market index fund.

Thank you both. I took the suggestion and made the selection today.

By the way, I checked all my 401k retirements accounts today and the overall portfolio from the balance as today is:

- US stock: 56%
- International stock: 15%
- Bond (including cash):29%

Is the bond% too high? I currently have personal brokerage account (taxable account) at Vanguard with some free cash uninvested (sit in the settlement fund), maybe I can invest in some Vanguard funds (e.g. Vanguard S&P-500 fund (VFIAX or VOO) or Vanguard Total Stock Market Fund (VTSAX or VTI)) to reduce the overall bond ratio a little bit, even add some Vanguard international fund to increase international stock ratio a little bit?
Any good suggestion? Thanks.

How can we make suggestions on your bond allocation? We don’t know your age , when you plan to retire, your portfolio, how much you have saved in terms of yearly expenses, what is your SS benefit, ….

I currently have 23% in bonds, is that a good amount for me?

[bonesly]

When talking about portfolio, one might need to look at all accounts overall. But I just want to treat this new 401k as individual one now for easy management and funds selection.
...
By the way, I checked all my 401k retirements accounts today and the overall portfolio from the balance as today is:

- US stock: 56%
- International stock: 15%
- Bond (including cash):29%

Is the bond% too high? I currently have personal brokerage account (taxable account) at Vanguard with some free cash uninvested (sit in the settlement fund), maybe I can invest in some Vanguard funds (e.g. Vanguard S&P-500 fund (VFIAX or VOO) or Vanguard Total Stock Market Fund (VTSAX or VTI)) to reduce the overall bond ratio a little bit, even add some Vanguard international fund to increase international stock ratio a little bit?
Any good suggestion? Thanks.

We might be able to say if it was too high if you showed us your target Asset Allocation (AA) along with "all accounts overall," but you didn't provide that information and were initially just wanting feedback on how to replicate a Target Date Fund (TDF) 2040 at lower cost. As an aside, fund selection might seem easier if you don't look across all accounts, but it may lead to bad choices that don't fit your overall AA (bad choices that were "easy"!).

If you look at all your accounts in comparison to your target AA, then it should be easy to know if you're underweight or overweight in US stock, Int'l Stock, or Bonds. You can provide your whole portfolio situation per the template in Asking Portfolio Questions (could just edit the first post to include this requested info), or you could try and look at your balance/imbalance yourself using the template AA Current & Proposed sheet linked below (you'll need to enter all your data across accounts).

Asset Allocation Sheet
AA Current and Proposed

An example usage of that sheet from another poster's situation is given below. They were previously in a pair of TDFs (5 years apart) and wanted an AA of 75/25 with 40% of stocks in int'l (per TDF world-cap weighting), but they were underweight in US Stock and overweight in Bonds (highlighted in red in the Current section). The proposed setup fixes the imbalance and also gets the bonds out of the Taxable account to adhere to Tax-Efficient Fund Placement.

[ruralavalon]

46% US Stock: FID 500 INDEX (FXAIX)/FID MID CAP IDX (FSMDX)/FID SM CAP IDX (FSSNX)
29% Intl stock: FID INTL INDEX (FSPSX)
25% bond: FID US BOND IDX (FXNAX)

For total ~46%, how much should be for each of the Large/Mid/Small Cap?

In this case, I'd suggest 46/0/0.

Regards,

I agree.

In my opinion a S&P 500 index fund is good enough by itself for investing in U.S. stocks, it covers 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 30+ years since the creation of the first total stock market index fund the two types of funds have had almost identical performance.

Some years one fund type was a little bit ahead, other years the other fund type was a little bit ahead. I would not bother adding another U.S. stock fund trying to better mimic a total stock market index fund.

Thank you both. I took the suggestion and made the selection today.

By the way, I checked all my 401k retirements accounts today and the overall portfolio from the balance as today is:

- US stock: 56%
- International stock: 15%
- Bond (including cash):29%

Is the bond% too high?

You have not provided the information needed to respond to this question.

What is your age? About how long until expected retirement? How have you reacted during past stock market crashes ( e.g. sold off your dtock funds, bought more stock funds, made no changes, stopped your regular contributions, increased your contributions, made no changes in your contributions)? Do you have debt, if so how much and what interest rates? Do you have dependants? How stable is your job, your emoloyer, and the industry you work in? How would you describe your risk tolerance?

I currently have personal brokerage account (taxable account) at Vanguard with some free cash uninvested (sit in the settlement fund), maybe I can invest in some Vanguard funds (e.g. Vanguard S&P-500 fund (VFIAX or VOO) or Vanguard Total Stock Market Fund (VTSAX or VTI)) to reduce the overall bond ratio a little bit, even add some Vanguard international fund to increase international stock ratio a little bit?
Any good suggestion? Thanks.

In a taxable account I suggest investing in a total stock markrt index fund like Vanguard Total Stock Market Index Fund (VTSAX), the ETF share class is VTI.