Prudential 401k picking allocations - Need advice

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Shinigami
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Joined: Tue Jan 14, 2020 11:46 am

Prudential 401k picking allocations - Need advice

Post by Shinigami » Tue Jan 14, 2020 1:36 pm

I am looking for some advice regarding my Prudential 401k account and allocations.
My employer matches 100% of the first 3.00% and then 50% of the next 3.00% for contributions to the 401k.
I am contributing to this 401k to gain the maximum that I can based on what my employer offers which is all pre-tax dollars. I am also looking to increase my contributions significantly this year and forward (need to look at my current expenses and reduce them).
After some research and trying to figure out the best way to invest and make changes to my 401k account I have selected to turn off goalmaker. I noticed some high cost allocations that did not seem right to me (plus also looking at others who have posted here regarding their own 401k accounts with Prudential). I did not see any options to select Vanguard within the account offerings.

I am currently 34 yrs old with a small family in the Midwest region. My account balance is currently at $61,312 (Performance went up between 1/1 and 1/13 by 1.32%). I would appreciate any help and advice on what I should at this time based on the information I have shared below.
I am also open to any other suggestions outside of this portfolio for future savings. I have been looking at several Roth IRAs as a secondary option.

I tried to share as much as I could find for each option on this plan.

As of today this is what my allocations look like: All below are based on a per $1,000 = %
All information and numbers shown below are as of a report from 1/13/2020.

-Fixed Income Fund (Stable Value) valued at $9,068.60 with holdings of 14.79%
Shares units = 327.0187 at a price of $27.731
Gross expense ratio of $4.80 per $1,000
Portfolio: Prudential Guaranteed Long Term Fund, Cigna Stable Value, MassMutual Syngic, Prudential Stable Value Fund
Performance: Prior month 0.25% / Prior quarter 0.75% / ytd 0.11%

Dryden S&P 500 Index Fund (Large Cap Blend) valued at $20,960.52 with holdings of 34.18%
Shares unit = 260.8332 at a price of $80.359
Gross expense ratio of $0.40 per $1,000
Performance: Prior month = 3.01% / Prior quarter $9.05% / ytd 1.84%

BlackRock Equity Market Index Fund (Mid Cap Blend) valued at $12,235.96 with holdings of 19.96%
Shares unit = 162.6922 at a price of $75.209
Gross expense ratio of $0.30 per $1,000
Performance: Prior month = 2.17% / Prior Quarter = 8.86% / ytd = 1.40%

All World ex-US Stock Index Fund (International - Large Blend) valued at $19,047.09 with holdings of 31.07%
Shares unit = 1,805.6552 at a price of $10.571
Gross expense ratio of $0.60 per $1,000
Performance: Prior month = 4.20% / Prior quarter = N/A / ytd 1.29%

*Below is information on other investment options that I have available but do not have selected.*

High Yield Bond / Prudential Fund (Fixed income - high yield bond) priced at $40.552
Gross expense seems really high at $3.20 per $1,000
Performance: Prior month = 2.46% / Prior quarter = 3.19% / ytd 0.27%
Primary index: Bloomberg Barclays Corporate High Yield Index

Large Cap Blend Fund priced at $18.609
Gross expense ratio at $4.20 per $1,000
Performance: Prior month = 1.87% / Prior quarter = 8.26% / ytd 2.06%
Allocation = Large cap value Barrow Hanley fund at 50% and SA/T Rowe Price Growth Stock Strategy at 50%

US Total Stock Market Index Fund (Large Cap - Blend) at $10.495
Gross expense ratio at $0.20 per $1,000
Performance: Prior month = 2.86% / Prior quarter = N/A / ytd = 1.78%
CIT Portfolio Allocation: US Stocks 98.10% / Non-US Stocks 1.10% / Cash 0.80%

Mid Cap Blend Fund (Mid Cap Blend) at $18.254
Gross expense ratio at $5.60 per $1,000
Performance: Prior month = 2.98% / Prior quarter = 9.17% / ytd = 1.76%
Allocation: Mid Cap Value / Robeco Boston at 50% and Mid Cap Growth / Westfield Capital Fund at 50%
Primary index: Russell Midcap Index

Small Cap Blend Fund at $15.423
Gross expense ratio at $7.10 per $1,000
Performance: Prior month = 2.96% / Prior quarter = 9.85% / ytd 0.07%
Allocation: Small Cap Value Integrity Fund 50% / Small Cap Growth Emerald Fund at 50%
Index: Russell 2000 Index

International Stock Fund (International-Large Blend) at $18.173
Gross Expense ratio at $5.70 per $1,000
Performance: Prior month = 3.40% / Prior quarter = 7.49% / ytd = .09%
Allocation: International Growth Artisan Partners Fund 50% / International Blend Lazard Fund 50%
Primary index: MSCI EAFE

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Duckie
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Location: California Bay Area

Re: Prudential 401k picking allocations - Need advice

Post by Duckie » Tue Jan 14, 2020 7:08 pm

Shinigami, welcome to the forum.
Shinigami wrote:I am also open to any other suggestions outside of this portfolio for future savings. I have been looking at several Roth IRAs as a secondary option.
Do you mean you are looking at different Roth IRA custodians, e.g. Vanguard, Fidelity, Schwab? Yes, if you can afford it open and fund two Roth IRAs, one for you and one for your spouse.
As of today this is what my allocations look like: All below are based on a per $1,000 = %
That "per $1,000" threw me off. That's not how we figure it.

I would go with:
  • US Total Stock Market Index (0.02%) -- Complete US stocks
  • All World ex-US Stock Index (0.06%) -- Almost complete international stocks
  • Fixed Income Fund (Stable Value) -- This isn't paying a lot but it's a safer fixed-income option than the High Yield Bond.

retired@50
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Joined: Tue Oct 01, 2019 2:36 pm

Re: Prudential 401k picking allocations - Need advice

Post by retired@50 » Tue Jan 14, 2020 7:45 pm

I agree with Duckie on the stock fund selections.

I'd sell out of the other stock funds you're in (Dryden S&P 500 Index Fund, BlackRock Equity Market Index Fund (Mid Cap Blend)) and use the proceeds to buy into the US Total Stock Market Index Fund you listed.

It appears your stable value fund and your high yield bond fund are both expensive from an expense ratio perspective. (Expense per $1,000). I'm not sure I'd use either choice, but that kind of puts you in a bind. You might consider asking the 401k plan administrator to include a bond index fund. I'd presume Prudential has something that would fit that description.

If you want to pursue the enhancements to the 401k plan, there is a wiki page on campaigning for a better 401k.

https://www.bogleheads.org/wiki/How_to_ ... 01(k)_plan

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

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ruralavalon
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Location: Illinois

Re: Prudential 401k picking allocations - Need advice

Post by ruralavalon » Tue Jan 14, 2020 8:04 pm

Asset allocation.
I am currently 34 yrs old with a small family in the Midwest region. . . . .
At age 34 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation"; and
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio".

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 both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".

It is often better to coordinate investments among 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, SIMPLE IRA, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in a taxable account or any IRAs. It is not necessary to put all elements of the desired asset allocation in each account.

This approach lets you avoid having to use sub-par, sub-optimal or high expense funds often found in work-based plans. Do not try to put all components of the asset allocation in every account.

In your 401k account I suggest switching both the existing balance and future contributions to:
1) US Total Stock Market Index Fund ER 0.02%; and
2) All World ex-US Stock Index ER 0.06%; and
3) Fixed Income Fund (Stable Value), Prior month 0.25% / Prior quarter 0.75% (annually this is 3%).

Instead of # 3 you might use a good bond fund in your new IRA.

You might suggest the addition of a total bond market index fund or other low expense intermediate-term bond fund.

My employer matches 100% of the first 3.00% and then 50% of the next 3.00% for contributions to the 401k.
I am contributing to this 401k to gain the maximum that I can based on what my employer offers which is all pre-tax dollars. I am also looking to increase my contributions significantly this year and forward (need to look at my current expenses and reduce them).

. . . . . .

I am also open to any other suggestions outside of this portfolio for future savings. I have been looking at several Roth IRAs as a secondary option.
I suggest also opening an IRA at a low cost provider like Vanguard, Fidelity or Schwab. Your spouse could also have an IRA.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

About how much (in dollars) do you believe that you might be able to contribute annually to investing (total, all accounts)? Establishing a high contribution rate is one of the most important investing decisions you can make. Don't limit yourself to just enough to get the employer match. Contribute as much as practical for you, making maximum use of tax-advantaged accounts.


Education.
I suggest that you read one or two books on investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below. A quick education for a beginning investor is Dr. Bernstein's free short on-line book, "If You Can".

If you have any questions just ask.

I hope that this helps.
Last edited by ruralavalon on Tue Jan 14, 2020 8:44 pm, edited 6 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
Watty
Posts: 18106
Joined: Wed Oct 10, 2007 3:55 pm

Re: Prudential 401k picking allocations - Need advice

Post by Watty » Tue Jan 14, 2020 8:09 pm

Do you have any target date funds in the 401k? If so what is the expense ratio?

Topic Author
Shinigami
Posts: 5
Joined: Tue Jan 14, 2020 11:46 am

Re: Prudential 401k picking allocations - Need advice

Post by Shinigami » Wed Jan 15, 2020 9:04 pm

Watty wrote:
Tue Jan 14, 2020 8:09 pm
Do you have any target date funds in the 401k? If so what is the expense ratio?
Hey Watty. Thanks for the question.
I don't have any target date funds within the 401k. That's not one of the options that I see as part of the plan offerings.

Ferdinand2014
Posts: 1014
Joined: Mon Dec 17, 2018 6:49 pm

Re: Prudential 401k picking allocations - Need advice

Post by Ferdinand2014 » Wed Jan 15, 2020 9:10 pm

This would be my choice at 100%

Dryden S&P 500 Index Fund (Large Cap Blend) valued at $20,960.52 with holdings of 34.18%
Shares unit = 260.8332 at a price of $80.359
Gross expense ratio of $0.40 per $1,000
Performance: Prior month = 3.01% / Prior quarter $9.05% / ytd 1.84%
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Topic Author
Shinigami
Posts: 5
Joined: Tue Jan 14, 2020 11:46 am

Re: Prudential 401k picking allocations - Need advice

Post by Shinigami » Thu Jan 16, 2020 11:56 am

Duckie wrote:
Tue Jan 14, 2020 7:08 pm
Shinigami, welcome to the forum.
Shinigami wrote:I am also open to any other suggestions outside of this portfolio for future savings. I have been looking at several Roth IRAs as a secondary option.
Do you mean you are looking at different Roth IRA custodians, e.g. Vanguard, Fidelity, Schwab? Yes, if you can afford it open and fund two Roth IRAs, one for you and one for your spouse.

Yes. I feel like it is probably a good idea to invest in other funds as well, outside of the current 401k that I do have. I looked at Prudential further and it looks like they do offer a Roth 401K plan as well. I am going to look and see if I can speak with someone at Prudential about what that offers me.
I have heard a lot about Vanguard also and will be looking at plan options with them as well. Any suggestions on a good plan with Vanguard to add as an addition to the current 401k with Prudential?

As of today this is what my allocations look like: All below are based on a per $1,000 = %
That "per $1,000" threw me off. That's not how we figure it.


I would go with:
  • US Total Stock Market Index (0.02%) -- Complete US stocks
  • All World ex-US Stock Index (0.06%) -- Almost complete international stocks
  • Fixed Income Fund (Stable Value) -- This isn't paying a lot but it's a safer fixed-income option than the High Yield Bond.
Thank you for all your suggestions and advice. I am thinking about the following percentages to distribute among the above. Let me know if you see a better way to distribute it.
- All Word ex-US Stock Index = 30%
- US Total Stock Market Index = 50%
- Fixed Income Fund = 10%

Topic Author
Shinigami
Posts: 5
Joined: Tue Jan 14, 2020 11:46 am

Re: Prudential 401k picking allocations - Need advice

Post by Shinigami » Thu Jan 16, 2020 11:59 am

Ferdinand2014 wrote:
Wed Jan 15, 2020 9:10 pm
This would be my choice at 100%

Dryden S&P 500 Index Fund (Large Cap Blend) valued at $20,960.52 with holdings of 34.18%
Shares unit = 260.8332 at a price of $80.359
Gross expense ratio of $0.40 per $1,000
Performance: Prior month = 3.01% / Prior quarter $9.05% / ytd 1.84%
Thanks for the suggestion Ferdinand. Just to make sure I understand you correctly here. You would allocate 100% of the funds solely on the Dryden S&P 500 Index? If so, why would you choose only thing one and none of the others that are available?

Ferdinand2014
Posts: 1014
Joined: Mon Dec 17, 2018 6:49 pm

Re: Prudential 401k picking allocations - Need advice

Post by Ferdinand2014 » Thu Jan 16, 2020 12:31 pm

I hav
Ferdinand2014 wrote:
Wed Jan 15, 2020 9:10 pm
This would be my choice at 100%

Dryden S&P 500 Index Fund (Large Cap Blend) valued at $20,960.52 with holdings of 34.18%
Shares unit = 260.8332 at a price of $80.359
Gross expense ratio of $0.40 per $1,000
Performance: Prior month = 3.01% / Prior quarter $9.05% / ytd 1.84%
Thanks for the suggestion Ferdinand. Just to make sure I understand you correctly here. You would allocate 100% of the funds solely on the Dryden S&P 500 Index? If so, why would you choose only thing one and none of the others that are available?
[/quote]

1.) Super low cost
2.) Broad based nearly total U.S. market
3.) Simple and easy at its best - reduces odds of behavioral tinkering.
4.) You are 34 and have many years of accumulation ahead so if this is money earmarked for retirement in 30 years, I am not convinced of the need to add bonds if you have a generous emergency savings and are sure you won’t need the money for greater than 20 years.
5.) I am of the mind that international isn’t absolutely necessary and won’t make much difference (this is a contentious subject and many will disagree with me)
6.) I believe Warren Buffett is correct in his recommendation for the average investor.
7.) Easy to track and compare your fund to the most published index in the world to make sure it is doing its job.

Most on this forum would suggest either a 2 or 3 fund portfolio. If you are risk averse add 10-20% bonds. If you want international add 10-30%. The option with the lowest cost are the ones to choose if you add either. My recommendation is based on my opinion and I put my money where my mouth is. I am of the opinion simplicity reduces chances for tinkering which is likely more hazardous to your wealth than a more complex portfolio that often results in behavioral errors. The perfect portfolio is the one you can stick with through thick and thin. Only you can decide that.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Topic Author
Shinigami
Posts: 5
Joined: Tue Jan 14, 2020 11:46 am

Re: Prudential 401k picking allocations - Need advice

Post by Shinigami » Thu Jan 16, 2020 1:15 pm

ruralavalon wrote:
Tue Jan 14, 2020 8:04 pm
Asset allocation.
I am currently 34 yrs old with a small family in the Midwest region. . . . .
At age 34 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation"; and
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio".

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 both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".

It is often better to coordinate investments among 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, SIMPLE IRA, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in a taxable account or any IRAs. It is not necessary to put all elements of the desired asset allocation in each account.

This approach lets you avoid having to use sub-par, sub-optimal or high expense funds often found in work-based plans. Do not try to put all components of the asset allocation in every account.

In your 401k account I suggest switching both the existing balance and future contributions to:
1) US Total Stock Market Index Fund ER 0.02%; and
2) All World ex-US Stock Index ER 0.06%; and
3) Fixed Income Fund (Stable Value), Prior month 0.25% / Prior quarter 0.75% (annually this is 3%).

I was thinking about these options specifically as based on some of the information you mentioned above (and attached material) and research. Plus, these options are at a much lower cost than some of the other options that are offered.

Instead of # 3 you might use a good bond fund in your new IRA.

You might suggest the addition of a total bond market index fund or other low expense intermediate-term bond fund.

I plan on looking at the options for an IRA plan with Vanguard and possibly using the following:
- Vanguard VTSAX
- Vanguard VTIAX
- Vanguard VXUS


My employer matches 100% of the first 3.00% and then 50% of the next 3.00% for contributions to the 401k.
I am contributing to this 401k to gain the maximum that I can based on what my employer offers which is all pre-tax dollars. I am also looking to increase my contributions significantly this year and forward (need to look at my current expenses and reduce them).

. . . . . .

I am also open to any other suggestions outside of this portfolio for future savings. I have been looking at several Roth IRAs as a secondary option.
I suggest also opening an IRA at a low cost provider like Vanguard, Fidelity or Schwab. Your spouse could also have an IRA.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

About how much (in dollars) do you believe that you might be able to contribute annually to investing (total, all accounts)? Establishing a high contribution rate is one of the most important investing decisions you can make. Don't limit yourself to just enough to get the employer match. Contribute as much as practical for you, making maximum use of tax-advantaged accounts.


Education.
I suggest that you read one or two books on investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below. A quick education for a beginning investor is Dr. Bernstein's free short on-line book, "If You Can".

If you have any questions just ask.

I hope that this helps.
All the information you shared has been very helpful and a lot to think about. I appreciate you including reference links and reading materials.
This is something that I definitely need to learn and invest some more time into.

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ruralavalon
Posts: 17121
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Prudential 401k picking allocations - Need advice

Post by ruralavalon » Thu Jan 16, 2020 1:26 pm

Shinigami wrote:
Thu Jan 16, 2020 1:15 pm
I plan on looking at the options for an IRA plan with Vanguard and possibly using the following:
- Vanguard VTSAX
- Vanguard VTIAX
- Vanguard VXUS
Vanguard Total International Stock Index Fund (VTIAX) and Vanguard Total International Stock ETF (VXUS) are the same, don't use both. The ETF is just a share class of the mutual fund, they invest in exactly the same stocks.

In your new IRA you could consider using some Vanguard Total Bond Market Index Fund (VBTLX) ER 0.05% instead of using the Stable Value fund in your 401k. You can coordinate between both accounts, treating both accounts together as a single unified portfolio. It is not necessary to have all elements of your asset allocation in each account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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