Author Topic: Reviewing SO's 401K and Looking for some MMM Opinions  (Read 602 times)

jeff2017

  • Stubble
  • **
  • Posts: 103
Reviewing SO's 401K and Looking for some MMM Opinions
« on: November 04, 2018, 07:45:36 PM »
Good news is that SO is a saver and will be maxing out her 401K. She is not all that into this type of stuff though and her Dad is the one that picked her positions several years ago (from first glance it appears her portfolio resembles a person her father's age, from a risk tolerance perspective and being heavy bonds). SO is 31 and the ideal preference would be to be much more stock heavy at this young age.

Below are all of her fund options including 1) Fund Type 2) Fund Name and 3) Current Elections.

1) Fund Type = Stable Value 2) Fund Name = T. Rowe Price Stable Value Common Tr-N 3) Current Elections = 0%

1) Fund Type = Fixed Income 2) Fund Name = BlackRock US Treasury Inf Prot Sec M 3) Current Elections = 10%

1) Fund Type = Fixed Income 2) Fund Name = Met West Total Return BondFund D 3) Current Elections = 0%

1) Fund Type = Intermediate-Term Bond 2) Fund Name = BlackRock US Debt Index Fund M 3) Current Elections = 30%

1) Fund Type = High Yield Bond 2) Fund Name = Eaton Vance Income Fund of Boston I 3) Current Elections = 0%

1) Fund Type = World Bond 2) Fund Name = Dreyfus/Standish Global Fixed Income I 3) Current Elections = 0%

1) Fund Type = Tactical Allocation 2) Fund Name = PIMCO All Asset Instl 3) Current Elections = 0%

1) Fund Type = Conservative 2) Fund Name = WPSTR-Conservative 3) Current Elections = 0%

1) Fund Type = Moderate 2) Fund Name = WPSTR-Moderate 3) Current Elections = 0%

1) Fund Type = Growth 2) Fund Name = WPSTR-Growth 3) Current Elections = 0%

1) Fund Type = Large Blend 2) Fund Name = Vanguard Institutional Index Trust 3) Current Elections = 30%

1) Fund Type = Infrastructure 2) Fund Name = DWS RREEF Global Infrastructure Inst 3) Current Elections = 0%

1) Fund Type = Mid-Cap Blend 2) Fund Name = Vanguard Extended Market Trust 3) Current Elections = 10%

1) Fund Type = Foreign Large Blend 2) Fund Name = Vanguard Total Intl Stock Index I 3) Current Elections = 20%

1) Fund Type = Foreign Large Growth 2) Fund Name = American Funds Europacific Growth R6 3) Current Elections = 0%

1) Fund Type = Diversified Emerging Mkts 2) Fund Name = Harding Loevner Emerging Markets Advisor 3) Current Elections = 0%

1) Fund Type = Global Real Estate 2) Fund Name = DFA Global Real Estate Securities Port 3) Current Elections = 0%

What would be the most Mustachian way to choose the portfolio allocations? I'm going to try and read more about each of these, but at first glance, my initial response is there is no reason to be in any Fund Types that are "Fixed Income". My main goal is to choose stock type investments rather than a bunch of bonds given her age to maximize growth over the next 20-30 years.

MDM

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #1 on: November 04, 2018, 09:01:39 PM »
SO is 31 and the ideal preference would be to be much more stock heavy at this young age.
Whose ideal: yours or hers?

jacoavluha

  • Stubble
  • **
  • Posts: 171
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #2 on: November 04, 2018, 09:35:32 PM »
Post expense ratios and any other fees please.
Need to provide a desired stock : bond and US : Intl ratio also unless you want others to pick that too

My advice would be aomething like 50% total us market 25% total intl index and 25% bonds but not clear to me what bond options are decent without more details

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #3 on: November 04, 2018, 09:51:35 PM »
SO is 31 and the ideal preference would be to be much more stock heavy at this young age.
Whose ideal: yours or hers?
[/quote

Both, she has been learning more and wants to set her 401K up for success

MDM

  • Walrus Stache
  • *******
  • Posts: 8683
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #4 on: November 04, 2018, 10:14:09 PM »
If she wants to go 100% stocks, going from 30/10/20 in those current three funds to something like 60/15/25 would not be unreasonable.

See Three-fund portfolio and Approximating total stock market for more thoughts.

JetBlast

  • Bristles
  • ***
  • Posts: 322
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #5 on: November 05, 2018, 09:02:42 AM »
Apart from the 60/40 stock to bond ratio for a 31 year old, those are most likely very good choices. There might even be a good reason for that ratio too.

How do you think she would react to seeing their portfolio drop by 30+% in a few months?  Iíve been through market meltdowns, so I know I can sit tight and therefore am comfortable with a 90% or higher equity ratio. If she doesnít have that tolerance the higher bond ratio might help keep them invested through downturns. Itís not mathematically optimal based on historical returns, but might still be the best choice for her personality.

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #6 on: November 07, 2018, 08:01:27 PM »
Thanks for your responses. I still need to review the options further.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1306
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #7 on: November 08, 2018, 05:20:34 AM »
You might show her the allocation found in Vanguard, Fidelity and Schwab's target retirement portfolios.  In every case I've seen, target date funds far from retirement allocate 10% bonds.  And if those funds are wrong, retirees holding billions of assets can sue over the mistake.  The advice built into target date funds comes with a much stronger reputation than any advice I could give.

CorpRaider

  • Bristles
  • ***
  • Posts: 337
    • The Corpraider Blog
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #8 on: November 08, 2018, 06:41:44 AM »
Seems like her dad knew what he was doing.  Used the index options to build a 60-40 with a slight tilt to small caps (versus replicating the total us market index), added a little inflation protection in the bond allocation, and hit the upper limit on foreign allocation for most bogleheads.  If she went through the financial crisis with a material amount of money in the account and didn't check it a lot/freak out maybe you can up the stock allocation, but I would be reluctant to mess with it. 
« Last Edit: November 08, 2018, 06:47:38 AM by CorpRaider »

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #9 on: November 08, 2018, 01:42:16 PM »
You might show her the allocation found in Vanguard, Fidelity and Schwab's target retirement portfolios.  In every case I've seen, target date funds far from retirement allocate 10% bonds.  And if those funds are wrong, retirees holding billions of assets can sue over the mistake.  The advice built into target date funds comes with a much stronger reputation than any advice I could give.

That is a very interesting and logical point. I will check into this further.

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #10 on: November 08, 2018, 01:45:48 PM »
Seems like her dad knew what he was doing.  Used the index options to build a 60-40 with a slight tilt to small caps (versus replicating the total us market index), added a little inflation protection in the bond allocation, and hit the upper limit on foreign allocation for most bogleheads.  If she went through the financial crisis with a material amount of money in the account and didn't check it a lot/freak out maybe you can up the stock allocation, but I would be reluctant to mess with it.

Does that seem a bit conservative for someone her age though? Looking at BlackRock US Debt Index Fund M specifically, which makes up a very significant portion of her allocation at 30%, returns are as follows: YTD: -2.63%, 3 Year = +1.36%, 5 Years = +2.24%. One idea I had was to lower this from 30% to something much smaller and beef up on the other stock based funds.

COEE

  • Pencil Stache
  • ****
  • Posts: 518
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #11 on: November 08, 2018, 07:30:45 PM »
Seems like her dad knew what he was doing.  Used the index options to build a 60-40 with a slight tilt to small caps (versus replicating the total us market index), added a little inflation protection in the bond allocation, and hit the upper limit on foreign allocation for most bogleheads.  If she went through the financial crisis with a material amount of money in the account and didn't check it a lot/freak out maybe you can up the stock allocation, but I would be reluctant to mess with it.

Does that seem a bit conservative for someone her age though? Looking at BlackRock US Debt Index Fund M specifically, which makes up a very significant portion of her allocation at 30%, returns are as follows: YTD: -2.63%, 3 Year = +1.36%, 5 Years = +2.24%. One idea I had was to lower this from 30% to something much smaller and beef up on the other stock based funds.

Past performance is not a good indicator of future returns.

Unless your SO is your spouse you should mind your own fin' business.  Even if she is your spouse, you should make sure she is on board with the total picture of your combined portfolio, or find out if they want a different allocation for their portion of the portfolio (this can be helpful in case of future separation).

I agree that a 40/40/20 stock, bond, int'l split isn't the worst thing in the world.  Could it be more aggressive at her age?  Sure, but maybe she's not comfortable with that.  Dad's tend to want the best for their daughters.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1306
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #12 on: November 10, 2018, 11:39:31 AM »
...
Past performance is not a good indicator of future returns.
Just to reinforce this with government authority, here's the quote the SEC requires in every mutual fund prospectus:

"That's why the SEC requires funds to tell investors that a fund's past performance does not necessarily predict future results."
https://www.sec.gov/answers/mperf.htm

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #13 on: November 10, 2018, 02:13:15 PM »
Seems like her dad knew what he was doing.  Used the index options to build a 60-40 with a slight tilt to small caps (versus replicating the total us market index), added a little inflation protection in the bond allocation, and hit the upper limit on foreign allocation for most bogleheads.  If she went through the financial crisis with a material amount of money in the account and didn't check it a lot/freak out maybe you can up the stock allocation, but I would be reluctant to mess with it.

Does that seem a bit conservative for someone her age though? Looking at BlackRock US Debt Index Fund M specifically, which makes up a very significant portion of her allocation at 30%, returns are as follows: YTD: -2.63%, 3 Year = +1.36%, 5 Years = +2.24%. One idea I had was to lower this from 30% to something much smaller and beef up on the other stock based funds.

Past performance is not a good indicator of future returns.

Unless your SO is your spouse you should mind your own fin' business.  Even if she is your spouse, you should make sure she is on board with the total picture of your combined portfolio, or find out if they want a different allocation for their portion of the portfolio (this can be helpful in case of future separation).

I agree that a 40/40/20 stock, bond, int'l split isn't the worst thing in the world.  Could it be more aggressive at her age?  Sure, but maybe she's not comfortable with that.  Dad's tend to want the best for their daughters.

Haha you mad tho?

jeff2017

  • Stubble
  • **
  • Posts: 103
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #14 on: November 10, 2018, 02:16:19 PM »
Seems like her dad knew what he was doing.  Used the index options to build a 60-40 with a slight tilt to small caps (versus replicating the total us market index), added a little inflation protection in the bond allocation, and hit the upper limit on foreign allocation for most bogleheads.  If she went through the financial crisis with a material amount of money in the account and didn't check it a lot/freak out maybe you can up the stock allocation, but I would be reluctant to mess with it.

Does that seem a bit conservative for someone her age though? Looking at BlackRock US Debt Index Fund M specifically, which makes up a very significant portion of her allocation at 30%, returns are as follows: YTD: -2.63%, 3 Year = +1.36%, 5 Years = +2.24%. One idea I had was to lower this from 30% to something much smaller and beef up on the other stock based funds.

Past performance is not a good indicator of future returns.

Unless your SO is your spouse you should mind your own fin' business.  Even if she is your spouse, you should make sure she is on board with the total picture of your combined portfolio, or find out if they want a different allocation for their portion of the portfolio (this can be helpful in case of future separation).

I agree that a 40/40/20 stock, bond, int'l split isn't the worst thing in the world.  Could it be more aggressive at her age?  Sure, but maybe she's not comfortable with that.  Dad's tend to want the best for their daughters.

Appreciate the response though.

COEE

  • Pencil Stache
  • ****
  • Posts: 518
Re: Reviewing SO's 401K and Looking for some MMM Opinions
« Reply #15 on: November 10, 2018, 07:09:40 PM »
Haha you mad tho?

Appreciate the response though.

Not mad at all - not sure what you mean.

Your welcome for the response.