New 401k options

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Topic Author
dl6286
Posts: 3
Joined: Tue Aug 14, 2018 1:29 pm

New 401k options

Post by dl6286 » Sat Oct 12, 2019 2:31 pm

I have $122,000 in my American funds Class 5 share 401k- mostly in Am Funds Target retirement 2055 (47 bp expense), Fundamental Investors (34 bps) and Capital Income Builder (34 bps). Only options are Am Funds. (31 years old)
Got a letter today that effective 11/11/19, will have options for the following index funds:
1. Fidelity Mid-Cap (3 bps)
2. Vanguard Growth Index (5 bps)
3. Vanguard Large Cap Index Admiral (5 bps)
4. Van Small Cap Index (5 bps)
5. Vanguard Value Index (5 bps)
6. Vanguard dividend appreciation (8)
7. Van Short term Treasury (10)

I have an old 401k with Vanguard index funds including the international one, better bond fund and better stable value option. My questions are:

1. Should I just focus on the Large Cap Index or is there any reason to try to utilize the Value and Growth Index's?
2. How fast should one convert over the American Funds to Index ones? I'm thinking it may make sense to do 15% a month or so with rebalancing to line up, but would like feedback. Plan is eventually to have 20-30% Active funds and 70-80% index.
3. Thoughts on dividend appreciation or just stick to larger indexes?

Thanks!

Flyer24
Moderator
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Joined: Sun Apr 08, 2018 4:21 pm

Re: New 401k options

Post by Flyer24 » Sat Oct 12, 2019 2:56 pm

I would recommend editing to follow this format to get better answers.

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lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: New 401k options

Post by lakpr » Sat Oct 12, 2019 4:46 pm

I would suggest to use only the Vanguard Large Cap index and Vanguard Small Cap index in a 87:13 ratio to approximate the total stock market index, as suggested by the wiki. Do it as soon as you get access. There is no tax consequence for trading within the 401k plans.

Since you said the bond fund and the international fund are better in your previous 401k, use that other 401k for holding bonds and international equities according to your asset allocation.

I do something very similar. The bond fund in my current 401k has a high expense ratio (0.39%), but I have access to Vanguard Total Bond Index fund in my previous 401k. So my portfolio consists of only equities in my current 401k, and mainly bonds in my previous 401k. I think I have another 6 years time before I run out of room, and when all balance in my previous 401k would be bonds.

Edited to add: as a rule, we Bogleheads frown on actively managed funds. We don't also advocate buying only small slices of the market, we buy the entire market. So basically, in answer to your questions 2 and 3, stick to index funds.
Last edited by lakpr on Sat Oct 12, 2019 7:16 pm, edited 1 time in total.

Topic Author
dl6286
Posts: 3
Joined: Tue Aug 14, 2018 1:29 pm

Re: New 401k options

Post by dl6286 » Sat Oct 12, 2019 6:27 pm

Thanks fro the feedback I'll get it all planned out for when it's rolled out in November. My old 401k has vanguard bond index, international index, and the extended market one that might be a better comparison to the rest of the market than the small cap offered here. Should be a nice opportunity to finally start simplifying.

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1789
Posts: 89
Joined: Fri Aug 16, 2019 3:31 pm
Location: OR

Re: New 401k options

Post by 1789 » Sat Oct 12, 2019 6:48 pm

If you are a lazy investor you cant go wrong with 100% Vanguard large cap index. You can also try replicating TSM by what lakpr suggested. Either way is fine.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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