Author Topic: Rebalancing my 401k contributions - need opinions  (Read 2209 times)

xclonexclonex

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Rebalancing my 401k contributions - need opinions
« on: February 19, 2016, 03:43:46 PM »
Hello all,

Thanks in advance for your time.

Here is some background info -

Age - 32
Income - $74000

I am going to try and increase my contributions to the max, but for now, I will be going with 10%. Here is the asset allocation I had in mind -

Current allocation -

FID FREEDOM 2050  (FFFHX) - 100%

Future allocation -

SPTN TOT MKT IDX ADV  (FSTVX) - 60%

SPTN INTL INDEX ADV  (FSIVX) - 5%

FIDELITY GOVT INCOME  (FGOVX) - 15%

VANG SM VAL IDX INV (VISVX) - 20%

Any opinions?

BarkyardBQ

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Re: Rebalancing my 401k contributions - need opinions
« Reply #1 on: February 19, 2016, 03:47:54 PM »
Why so much in bonds and little in International?

I'm almost 32 as well, and my fidelity accounts are 60% FSTVX, 25% FSGDX, and 15% FSEVX. If you know why you like the allocation, stick with it, but you are here asking :)

I have 10 years til retirement, I don't think about fixed income or minimizing volatility.

xclonexclonex

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Re: Rebalancing my 401k contributions - need opinions
« Reply #2 on: February 19, 2016, 03:50:13 PM »
I honestly don't know why I went with that.

Do you have a better recommendation?

Thanks.

bassman2003

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Re: Rebalancing my 401k contributions - need opinions
« Reply #3 on: February 19, 2016, 08:40:04 PM »
Its important to understand a couple of things....first your goals, time frame until you withdraw the money, etc.

Second, its very important to understand what is underlying in the funds you are considering.  The Freedom 2050 has about 60% US stocks, 30% international stocks, and 5% bonds (plus a few other small misc type categories).  So the asset allocation you are considering moving to is MORE conservative than what you currently have.

US Total Stock Market Indexes are a great core holding for your US equities.  I actually hold 2 funds for US equites: an S&P 500 index fund + the extended market index fun (all the non S&P 500 stocks) instead of a total stock market index.  Due to having an institutional class S&P 500 (.05% ER) available in my 401k (vs .07% for the total stock market fund), this keeps my expenses a hair lower, and also allows me to weight small to mid cap stocks a bit more heavily, which increases volatility but historically has increased returns.  I believe the US total stock market funds typically allocate based upon market capitalization, so about 79% of a total stock market index fund is typically the funds of the S&P 500, and only 21% is the extended market (mid and small cap)  Then I hold the rest of my core holdings in international funds, specifically the Spartan Intl Index Fund.  It has a much lower expense ratio, but does not have the emerging markets exposure like VSGDX does.  I am currently exploring the best avenue to add more emerging markets exposure to my 401k.  I usually am about a 65-70 in US index funds vs 30-35% in international funds.  I don't hold any bonds funds.

A great resource for all of these funds is to read the analysis on morningstar of each fund.  I use the institutional access that my local library has (just use their website, log in, and then can search for morningstar and it leads me to their website, logged in, with all the subscriber content unlocked).  Morningstar has great research that normally costs $200/year for each investor, but is free through my library.

Sorry for the long post, I was just attracted to your question because I'm 31, make 74k, and have a Fidelity 401k.  This is the first year I'll be able to max out both my 401k and mine/wife's Roth IRAs.  This is my first post on the MMM boards, been reading the blog/forums for awhile and am a fan.  Good luck.

bassman2003

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Re: Rebalancing my 401k contributions - need opinions
« Reply #4 on: February 19, 2016, 08:41:47 PM »
By the way, the vanguard small cap value is a great fund.  I don't have this as an option in my 401k, but have considered buying (in large quantities, to save on the $7 fee) into the the Vanguard Small cap value index fund ETF (VBR) within my Fidelity brokerage link in my 401k.  Small caps typically suffer worse than large caps in a market downturn, so they're a great buy when the market dips (the VBR dipped into bear market category recently, a great buy).  And according to the research in the Intelligent Asset Allocator book, historically small cap value have the most volatility but the highest returns of any US stock category.  And VBR (the ETF version of the fund) has a .09% ER, the lowest of any small cap value I've seen.

Jeremy E.

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Re: Rebalancing my 401k contributions - need opinions
« Reply #5 on: February 19, 2016, 10:36:31 PM »
Personally, I would put 100% into the total stock market index funds and stop thinking about the allocation, but that's just me

Trip

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Re: Rebalancing my 401k contributions - need opinions
« Reply #6 on: February 20, 2016, 04:46:03 AM »
Personally, I would put 100% into the total stock market index funds and stop thinking about the allocation, but that's just me

This. In fact that's exactly what I do at the moment ($100,000 all in VTSAX and VINIX. They don't offer VTSAX or an equivalent in my 401K options). Once my investment portfolio hits $200,000 in a few years, then I will consider beginning to shift my allocation more towards what William Bernstein recommends in the intelligent asset allocator (MMM's Review on the book here). I'm 25 and maxing my 401K at the moment, so willing to ride the market in the meantime.

xclonexclonex

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Re: Rebalancing my 401k contributions - need opinions
« Reply #7 on: February 20, 2016, 03:54:34 PM »
By the way, the vanguard small cap value is a great fund.  I don't have this as an option in my 401k, but have considered buying (in large quantities, to save on the $7 fee) into the the Vanguard Small cap value index fund ETF (VBR) within my Fidelity brokerage link in my 401k.  Small caps typically suffer worse than large caps in a market downturn, so they're a great buy when the market dips (the VBR dipped into bear market category recently, a great buy).  And according to the research in the Intelligent Asset Allocator book, historically small cap value have the most volatility but the highest returns of any US stock category.  And VBR (the ETF version of the fund) has a .09% ER, the lowest of any small cap value I've seen.

Thank you so much for advice. I will need to process all the information you gave me. I am still in the learning phase of investing. I appreciate you taking the time to write this.

Personally, I would put 100% into the total stock market index funds and stop thinking about the allocation, but that's just me

I thought about this as well...but it just seems risky, my fear is probably unfounded, and I will definitely consider this.

This. In fact that's exactly what I do at the moment ($100,000 all in VTSAX and VINIX. They don't offer VTSAX or an equivalent in my 401K options). Once my investment portfolio hits $200,000 in a few years, then I will consider beginning to shift my allocation more towards what William Bernstein recommends in the intelligent asset allocator (MMM's Review on the book here). I'm 25 and maxing my 401K at the moment, so willing to ride the market in the meantime.

I intend to be able to max out my 401k at some point in the future. I will start increasing my contributions each month this year.