Author Topic: 401k Allocations  (Read 552 times)

jasert39

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401k Allocations
« on: May 11, 2018, 05:57:06 PM »
Through my employer I have a retirement account that allows me to move the percentage of my account into different funds, the below allocation list was assigned after filling out a risk assessment form that I filled out when the new company took over our retirement program in 2014.  Since May of 2014 my rate of return has been 5%, my questions are... I am 37 years old, should close to 35% of my account be in bonds?  If not would you recommend moving somemore in to the 500 Index Fund or is there another option I should look into? (More funds are avaialble through my account portal).  And i guess does anything else look out of line?


Vangaurd RealEst Index Adml 5.89%
Vangaurd Devl Mark Index %15.97%
Vanguard Emrg Mark Stk Index 5.15%
Vanguard Small Cap Index 9.26%
Vanguard 500 Index 23.68%
Vanguard Val Index Adml 5.72%
Fed Inst Hi Yld Bd Inst 5.60%
Vangaurd Ttl Bond Mark Ind 23.22%
Vanguard ttl Intl Bond Index Adml 5.52%

elysianfields

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Re: 401k Allocations
« Reply #1 on: May 11, 2018, 06:34:38 PM »
What is your investment horizon?  When do you plan to retire?

35% is a metric f-ton of bonds and explains your very low return over a period when stocks have been kicking ass.  But you cannot go back in time...

I don't think you know why you are invested in these funds, other than a survey told you to invest in them.  You're also overweighted in international, did you do so intentionally?  Also Vanguard Value Index is a subset of the 500 Index, so these are all thrown together.

If you don't want to get into the weeds on deciding which funds you want, use Vanguard Total Market Index / Admiral, the broadest US market index, for your US portion and Vanguard Total International Stock Index for your international exposure.

If you'd prefer to analyze this a bit, you could do some proportions of 500 Index, Mid Cap and Small Cap (if you want to overweight the smaller end of the scale), and keep the Developed Market and Emerging Market international exposure.  Any particular reason why you're in the Real Estate one?

RWD

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Re: 401k Allocations
« Reply #2 on: May 11, 2018, 06:39:40 PM »
Read JLCollins stock series and then figure out how you want to be invested.

My feeling is that you have too much bond exposure and your asset allocation is unnecessarily complicated (too many different funds).

jasert39

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Re: 401k Allocations
« Reply #3 on: May 11, 2018, 06:45:59 PM »
What is your investment horizon?  When do you plan to retire?

35% is a metric f-ton of bonds and explains your very low return over a period when stocks have been kicking ass.  But you cannot go back in time...

I don't think you know why you are invested in these funds, other than a survey told you to invest in them.  You're also overweighted in international, did you do so intentionally?  Also Vanguard Value Index is a subset of the 500 Index, so these are all thrown together.

If you don't want to get into the weeds on deciding which funds you want, use Vanguard Total Market Index / Admiral, the broadest US market index, for your US portion and Vanguard Total International Stock Index for your international exposure.

If you'd prefer to analyze this a bit, you could do some proportions of 500 Index, Mid Cap and Small Cap (if you want to overweight the smaller end of the scale), and keep the Developed Market and Emerging Market international exposure.  Any particular reason why you're in the Real Estate one?

You are exactly correct, I have no idea why I am in these particular funds.  I filled out the survey this allocation is what came back.    Hence the reason for my question.  I am by no means a financial expert and just now (late the game I know), paying much more attention to finances regarding my future. 

I also understand I can't go back, just want to know what I might be able to do to benefit in the future,  ideally I say my reitrement age would be 55, meaning about another 18 years to save.  Would moving the real estate and say 15% of the bond into Vanguard Total Market be unreasonable?

Thank you for taking the time to respond.

jasert39

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Re: 401k Allocations
« Reply #4 on: May 11, 2018, 06:48:05 PM »
Read JLCollins stock series and then figure out how you want to be invested.

My feeling is that you have too much bond exposure and your asset allocation is unnecessarily complicated (too many different funds).

Will do, thank you. 

MustacheAndaHalf

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Re: 401k Allocations
« Reply #5 on: May 12, 2018, 08:13:42 AM »
Respecting that risk assessment will draw out your retirement.  But if you increase your stock exposure, what happens when stock performance is -20% one year... or two?  Will you keep the same % allocated to stocks?

I'd favor imitating the target date funds of Vanguard and Fidelity, both of which allocate 10% to bonds.  Also, dump the junk bonds - they are called high yield to attract people in without mentioning they are bonds rated below investment grade.  Junk bonds drop like stocks but earn like bonds - so it's better to take that type of risk with stocks, and use higher quality bonds for safety.

I've noticed advisers tend to make more complicated choices - maybe that way, it seems like things are too complicated and you have to rely on them.

Does your 401(k) have "total international" or "total US stock market" funds in it?  You could start with 20% in total international, and your S&P 500 and small cap allocation in a total stock market fund.  And then make the decision if you want to emphasize small cap stocks, or value stocks.

jasert39

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Re: 401k Allocations
« Reply #6 on: May 12, 2018, 12:19:33 PM »
Respecting that risk assessment will draw out your retirement.  But if you increase your stock exposure, what happens when stock performance is -20% one year... or two?  Will you keep the same % allocated to stocks?

I'd favor imitating the target date funds of Vanguard and Fidelity, both of which allocate 10% to bonds.  Also, dump the junk bonds - they are called high yield to attract people in without mentioning they are bonds rated below investment grade.  Junk bonds drop like stocks but earn like bonds - so it's better to take that type of risk with stocks, and use higher quality bonds for safety.

I've noticed advisers tend to make more complicated choices - maybe that way, it seems like things are too complicated and you have to rely on them.

Does your 401(k) have "total international" or "total US stock market" funds in it?  You could start with 20% in total international, and your S&P 500 and small cap allocation in a total stock market fund.  And then make the decision if you want to emphasize small cap stocks, or value stocks.

Yes, i have access to "total US stock market" and "total international stock index admiral"...would a resonable allocation be 10%bonds, 15 percent total international and remaining 75% in the total us stock market?