Author Topic: Doing it all wrong (401k in managed funds)  (Read 1020 times)

CalBal

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Doing it all wrong (401k in managed funds)
« on: May 11, 2018, 01:47:48 PM »
I've had my 401k allocation though my company in a "moderate" ("balanced growth") fund which is a combination of 7 of the other funds that they offer. Expenses are per each of the funds and vary from 0.28% to 0.84% (OMG). In addition, cumulatively, the "moderate" fund is around 27% bonds, almost 7% cash, and 2% of some mysterious category caled "other" (??), with the rest in a variety of stock types (including a not-insignificant percentage of non-US stock). I've been doing ok, but obviously could have been doing better.

This sucks and I am so mad at myself for not paying attention.

I have 100% of my other investments (IRA and taxable) in Vanguard admiral index funds (VBIAX, VTIAX, VTSAX). I think I would be happier with everything in an index fund (with maybe an 80/20 or 85/15 stock/bond split). The only index fund available in my 401K appears to be WF/Blackrock S&P 500 Index. Is this a reasonable fund to invest in? I was looking for Vanguard funds, but they only have one, and it isn't an index. I suspect I would split my current 401k between the index fund (if it seems reasonable) and I guess the Wells Fargo Core Bond I fund. Or else, but everything in the index fund here and move some of my other investments into the bond fund over at Vanguard.

Please help!

Note: I am a bit confused about the expenses. Is the expense listed here (in terms of gross % per $1000) the same as Vanguard's expense ratio (which is, for example, 0.04% for VTSAX)? (In other words, why are they expressed in terms per $1000?) I think they are but wanting to confirm.

Here is what is available to me (with returns listed in the line below each name).

Last Mo   3 Mo   YTD   1-yr   3yr   5-yr   10-yr   Since Incep        Total Annual Expense (Gross % per $1,000)
                           
  American Funds American Balanced R6 (RLBGX)
0.34   -3.93   -0.82   9.05   7.78   9.26   N/A   12.12*   0.28%
  American Funds Capital World Gr&Inc R6 (RWIGX)
1.35   -4.01   1.79   16.15   8.29   9.57   N/A   12.17*   0.45%
  American Funds Fundamental Investors R6 (RFNGX)
0.23   -6.09   -0.23   14.33   11.63   13.31   N/A   15.20*   0.30%
  American Funds Growth Fund of Amer R6 (RGAGX)
1.49   -3.36   4.54   19.87   13.10   15.16   N/A   15.69*   0.33%
  AMG Managers Fairpointe Mid Cap Fund I (ABMIX)
-1.24   -10.57   -5.66   0.37   4.19   10.30   9.46   9.86   0.89%
  First Eagle Global I (SGIIX)
0.51   -4.19   -0.57   7.00   6.13   6.82   6.65   10.72   0.84%
  Franklin Mutual Quest R6 (FMQRX)
2.73   -0.61   2.21   8.39   5.08   N/A   N/A   7.47*   0.73%
  Franklin US Government Secs Adv (FUSAX)
-0.40   -0.53   -1.42   -1.12   0.07   0.77   2.84   4.40   0.62%
  Invesco American Franchise R5 (VAFNX)
0.48   -4.75   4.57   16.66   12.10   15.10   N/A   12.21*   0.72%
  Invesco Mid Cap Growth R5 (VGRJX)
-0.53   -2.51   3.19   14.44   7.06   11.69   N/A   11.87*   0.83%
  Invesco Small Cap Growth R5 (GTSVX)
0.90   -1.58   3.78   20.09   11.19   14.25   11.28   9.42   0.82%
  Mairs & Power Growth Inv (MPGFX)
0.02   -6.86   -4.05   5.26   8.03   10.29   9.15   11.25   0.64%
  Putnam International Equity Y (POVYX)
0.57   -5.31   0.45   14.81   4.25   6.58   2.14   6.86   0.98%
  T. Rowe Price Capital Appreciation (PRWCX)
0.32   -2.80   0.74   8.76   8.83   10.78   9.10   11.27   0.71%
  TIAA-CREF Instl Mid-Cap Value Inst (TIMVX)
0.86   -2.95   -0.30   7.43   6.35   10.13   7.99   11.77   0.41%
  Vanguard Mid Cap Growth Inv (VMGRX)
0.29   -1.57   4.35   18.10   6.81   11.35   9.23   10.18   0.36%
  Wells Fargo Core Bond I (MBFIX)
-0.75   -1.17   -2.29   -0.48   0.98   1.50   4.31   4.63   0.50%
  Wells Fargo Stable Return I
0.17   N/A   N/A   N/A   N/A   N/A   N/A   0.46*   0.384%
  WF/BlackRock S&P 500 Index CIT N
-2.55   -0.76   -0.76   14.00   10.80   13.31   9.58   11.02   0.034%

MDM

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Re: Doing it all wrong (401k in managed funds)
« Reply #1 on: May 11, 2018, 04:09:21 PM »
The only index fund available in my 401K appears to be WF/Blackrock S&P 500 Index. Is this a reasonable fund to invest in?
Yes.  The S&P 500 performs very similarly to a total US market index.

Quote
Note: I am a bit confused about the expenses. Is the expense listed here (in terms of gross % per $1000) the same as Vanguard's expense ratio (which is, for example, 0.04% for VTSAX)? (In other words, why are they expressed in terms per $1000?) I think they are but wanting to confirm.
I believe you are correct and the website description is wrong.

Steeze

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Re: Doing it all wrong (401k in managed funds)
« Reply #2 on: May 11, 2018, 04:31:06 PM »
If it works with your target allocation, I would go 100% in the Black rock S&P500 fund here and get your bond allocation in your VG account cheaper.

CalBal

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Re: Doing it all wrong (401k in managed funds)
« Reply #3 on: May 14, 2018, 01:24:10 PM »
Thanks @MDM and @Steeze the info is very helpful.

I went ahead and moved the 401k to the Blackrock S&P500 index and started rebalancing my Vanguard accounts and loading bonds into the tax advantaged accts. Overall, I'm a little low in bonds currently (but only a percent or so from where I was before, cumulatively), but I should be able to fix that in a month or two. Please let the markets not tank in that time! Now we'll see what effect it will have on my return.

Spitfire

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Re: Doing it all wrong (401k in managed funds)
« Reply #4 on: May 15, 2018, 10:41:13 AM »
When I saw your list my eyes immediately went to the expense ratios. The lowest one was the S&P 500 fund, which should work great for you. Good choice.

CalBal

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Re: Doing it all wrong (401k in managed funds)
« Reply #5 on: May 15, 2018, 11:02:04 AM »
Thanks for the vote of confidence @Spitfire ! I will admit, when I set it up 7 or 8 years ago I didn't really know very much about investing, and I didn't look into it really either. I started an IRA at the same time through Vanguard (and eventually added a taxable acct there too) and learned about index funds, but it never occurred to me to go back and review my 401k, so it has basically been on autopilot this entire time, except during the times when I upped my contribution. I've been at the max contribution for a couple of years now though, so I *really* haven't been thinking about it, other than to periodically look at the balance. And one day it just occurred to me to check the actual allocation. When I saw the expense ratios I nearly had a heart attack. Now granted, the market has been on a tear during those 7-8 years, so I have done really well, but holy crap. (At least none are over 1% I guess?) At any rate, I fixed it (whew!) and feel a lot better now!

Heckler

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Re: Doing it all wrong (401k in managed funds)
« Reply #6 on: May 15, 2018, 03:06:35 PM »
<1% before you clued in. Lucky.

Mine was 2.8% with a 6% DSC. 

Carry on, you’re fine

MustacheAndaHalf

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Re: Doing it all wrong (401k in managed funds)
« Reply #7 on: May 16, 2018, 09:05:58 AM »
Since you're likely to have other jobs and thus other 401(k) plans in the future, I recommend the same strategy going forward: pick the lowest expense ratio, and invest in that.  Passive index funds are the cheapest to run, so it's an easy way to find those funds even if the naming gets confusing.  Also, most people know S&P 500 index funds are good investments, so most 401(k) plans include them.

That said, in your other retirement accounts try and pickup some international exposure.

CalBal

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Re: Doing it all wrong (401k in managed funds)
« Reply #8 on: May 16, 2018, 11:19:38 AM »
Mine was 2.8% with a 6% DSC. 

OMG!!

I'm glad I did realize!

CalBal

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Re: Doing it all wrong (401k in managed funds)
« Reply #9 on: May 16, 2018, 11:31:13 AM »
Since you're likely to have other jobs and thus other 401(k) plans in the future, I recommend the same strategy going forward: pick the lowest expense ratio, and invest in that.  Passive index funds are the cheapest to run, so it's an easy way to find those funds even if the naming gets confusing.  Also, most people know S&P 500 index funds are good investments, so most 401(k) plans include them.

That said, in your other retirement accounts try and pickup some international exposure.

Thanks @MustacheAndaHalf ! At Vanguard, I have VBIAX, VTIAX, and VTSAX (and have for a long time). I just added VBTLX since I have no bonds in my 401k anymore, and am shuffling things around, so VTIAX is only about 3% of my total allocation right now (and VBTLX is 12%). It (VTIAX) was almost double that though before. Can you suggest any resources that could help me decide how high I want to go with international?

MustacheAndaHalf

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Re: Doing it all wrong (401k in managed funds)
« Reply #10 on: May 17, 2018, 06:36:50 AM »
You can read Vanguard's white paper on diversification.
https://www.vanguard.com/pdf/ISGGEB.pdf

My takeaway is that 20% international has the highest chance of being helpful, and if you can stomach longer periods of international losing out to U.S. stocks, there's room to go as high as 40% international.  The 20-40% range depends on your tolerance and patience.

CalBal

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Re: Doing it all wrong (401k in managed funds)
« Reply #11 on: May 17, 2018, 12:18:01 PM »
Thanks for the recommend @MustacheAndaHalf , I'll take a look at that paper. Sounds like I should up my allocation a fair amount. I'll be able to do that in a month (just moved stuff around a few days ago).