Author Topic: Another work 401k allocation thread!  (Read 396 times)

ZORAKC2C

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Another work 401k allocation thread!
« on: September 12, 2017, 10:35:13 AM »
Hey Mustachians,

I just started learning how to FIREbend a couple of weeks ago, and I'm ready to reallocate my assets in my work 401k. Here are the funds that I think are my best options:

FidelityŽ 500 Index Premium (FUSVX) - 0.04% expense rate - Large Blend
Vanguard Growth Index Admiral (VIGAX) - 0.06% - Large Growth
Vanguard Equity-Income Adm (VEIRX) - 0.17% - Large Value
Vanguard Strategic Equity Inv (VSEQX) - 0.18% - Mid-Cap Blend
Vanguard Mid-Cap Growth Index Admiral (VMGMX) - 0.07% - Mid-Cap Growth

My hunch is to reallocate everything into FUSVX since it's an S&P 500 Index fund/a sister to Vanguard's VFIAX. But, would there be any benefit to doing a majority in FUSVX and a bit in VIGAX and/or VMGMX (say, 80/10/10?), or would it be - as I assume - unnecessarily complicating things just to dive into some Vanguard funds?

Thanks in advance for your insight!

markpst

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Re: Another work 401k allocation thread!
« Reply #1 on: September 12, 2017, 10:47:24 AM »
Personally,

I would probably do something like 60% large cap, 20% medium cap, and 20% small cap. If small cap isn't a reasonable option, I would do 80% FUSVX and 20% VMGMX. A lot of people believe in just going for the Total US Market or the 500 index.

Just for perspective, the top 10 holdings of the 500 index (Vanguard in the link below, but Fidelity would be similar) make up 18.2% of the portfolio. That is a number I'm not comfortable with.

https://www.advisorperspectives.com/articles/2017/01/30/is-a-total-market-fund-the-most-diversified-portfolio

ZORAKC2C

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Re: Another work 401k allocation thread!
« Reply #2 on: September 12, 2017, 11:35:01 AM »
Personally,

I would probably do something like 60% large cap, 20% medium cap, and 20% small cap. If small cap isn't a reasonable option, I would do 80% FUSVX and 20% VMGMX. A lot of people believe in just going for the Total US Market or the 500 index.

Just for perspective, the top 10 holdings of the 500 index (Vanguard in the link below, but Fidelity would be similar) make up 18.2% of the portfolio. That is a number I'm not comfortable with.

https://www.advisorperspectives.com/articles/2017/01/30/is-a-total-market-fund-the-most-diversified-portfolio

Thanks--I'll take that into consideration! As far as small caps, I didn't list any available because their expense rates are significantly higher than any of these funds, and I'm pretty comfortable not being quite as diverse for the sake of limiting those expenses.

seattlecyclone

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Re: Another work 401k allocation thread!
« Reply #3 on: September 12, 2017, 11:42:39 AM »
My general opinion is that simplicity has some value. Don't split your investments between different funds unless you expect those funds to have significantly different performance characteristics from each other. We buy bonds and international assets precisely because they perform differently from US stocks.

Those other funds you mention adding to your S&P 500 fund don't really fit the bill. Take a look at this graph of three of your funds plus VTSAX and decide for yourself whether adding a little bit of some of these other funds is worth the complexity that they would add to your tracking and rebalancing.
I made a blog! https://seattlecyclone.com/

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caracarn

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Re: Another work 401k allocation thread!
« Reply #4 on: September 12, 2017, 12:04:31 PM »
I'm a big fan or simplicity, after having gone through years of being one of those fools who thought they could outrun the market my spreading around different funds/stocks. 

I'd pick a stock fund, and if you wanted a bond fund to offset.  I follow Bogle's and Buffett's logic that being us large US companies gets you adequate international exposure these days.  So I hold VTSAX and VTBLX.  I also now have VFIAX as that is the closest to VTSAX that my 401(k) offers.  I've been told by our plan advisor that it is likely we will have VTSAX next year and then I will move everything back there.  Then I drive to an 85/15 split stocks and bonds and let it marinate.

ZORAKC2C

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Re: Another work 401k allocation thread!
« Reply #5 on: September 12, 2017, 01:30:37 PM »
My general opinion is that simplicity has some value. Don't split your investments between different funds unless you expect those funds to have significantly different performance characteristics from each other. We buy bonds and international assets precisely because they perform differently from US stocks.

This makes a lot of sense--thanks!

I'd pick a stock fund, and if you wanted a bond fund to offset.  I follow Bogle's and Buffett's logic that being us large US companies gets you adequate international exposure these days.  So I hold VTSAX and VTBLX.  I also now have VFIAX as that is the closest to VTSAX that my 401(k) offers.  I've been told by our plan advisor that it is likely we will have VTSAX next year and then I will move everything back there.  Then I drive to an 85/15 split stocks and bonds and let it marinate.

What all I'd read and heard before posting jives with what you're saying. While I've read a bit on Bogleheads about the 3-fund portfolio approach, due to my risk tolerance, the adequate international exposure inherent in these index funds that you mentioned, and an attempt to simplify things, I had been leaning towards doing 100% stocks and slowly adding bonds as I bolstered my portfolio a bit more.