Author Topic: 401k investment elections  (Read 2544 times)

FiguringItOut

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401k investment elections
« on: July 09, 2015, 01:37:37 PM »
My new company uses Schwab for their 401k plan manager.  Below is a list of investments available to me.  I bolded those I chose for my 401k contributions with the allocation % next to the investment.

VANGUARD TARGET RTMT 2040 INV    15%
VANGUARD TARGET RTMT 2010 INV
VANGUARD TARGET RTMT 2030 INV
VANGUARD TARGET RTMT 2020 INV
MORLEY STABLE VALUE (SIC1Z)
SCHWAB RETIREMENT ADV MONEY
DODGE & COX INCOME
WESTCORE PLUS BOND
DODGE & COX BALANCED
OAKMARK EQUITY & INCOME I
T. ROWE PRICE CAPITAL APPREC
DODGE & COX STOCK
PERKINS MID CAP VALUE T
SCHWAB TOTALSTOCK MKT IDX    20%
AMCENT EQUITY INCOME INV
HARBOR INTERNATIONAL INSTL
OAKMARK INTERNATIONAL I
VANGUARD GNMA ADM
VANGUARD PRIMECAP ADM
VANGUARD TARGET RTMT 2050 INV
VANGUARD 500 INDEX ADM    25%
VANGUARD MID CAP INDEX ADM    20%
VANGUARD SMALL CAP INDEX ADM    20%

VANGUARD TOTAL INTL STK ADM
VANGUARD TOTAL BOND MKT ADM
HOMESTEAD SMALL COMPANY STOCK
ARIEL APPRECIATION INSTL

The ones I chose are those with lower expenses (expenses range from 0.07% to 2.3% between all these options, those I chose are between 0.07% and 1.16%).

These are also funds with better YTD, 1-year, and 10-year track records out of the bunch. 

This is the first time am setting up a 401k account, so I would like some feedback.  I am 39 y.o. and will most likely not RE (due to financial stupidity in my prior financial life); so assume I have 20 years ahead of me to grow this portfolio.

Thanks

forummm

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Re: 401k investment elections
« Reply #1 on: July 09, 2015, 01:44:47 PM »
Which ones are 1.16? I would ditch them. What's 0.07? I would probably put 100% into whatever those options were.

FiguringItOut

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Re: 401k investment elections
« Reply #2 on: July 09, 2015, 01:57:06 PM »
Ok, I just checked again.  I looks like I ditched the 1.16% expense fund already.  Those I have left are below with my % allocation and expense.

VANGUARD TARGET RTMT 2040 INV    15%   expense 0.18%
SCHWAB TOTALSTOCK MKT IDX    20%     expense 0.09%
VANGUARD 500 INDEX ADM    25%     expense 0.05%
VANGUARD MID CAP INDEX ADM    20%     expense 0.09%
VANGUARD SMALL CAP INDEX ADM    20%     expense 0.09%

These really are the lowest expense funds available. 

How do I know if this is a good mix?  Should I get rid of VANGUARD TARGET RTMT 2040 INV (highest expense) and re-allocate between others? 

How do determine if this a good diversification?  The all have very similar returns, but it's a mix of small, mid, and large caps, plus a target date. 


forummm

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Re: 401k investment elections
« Reply #3 on: July 09, 2015, 02:11:05 PM »
This is a fine allocation. But the Schwab fund is essentially the same as the bottom 3 Vanguard funds in your latest post put together. No harm in the duplication--just pointing it out. If you want to follow the market capitalization, and have 20% in the target retirement fund, you would have:

VANGUARD TARGET RTMT 2040 INV    20%   expense 0.18%
VANGUARD 500 INDEX ADM    60%     expense 0.05%
VANGUARD MID CAP INDEX ADM    10%     expense 0.09%
VANGUARD SMALL CAP INDEX ADM    10%     expense 0.09%

The 500 index fund makes up about 75% of the domestic market cap, and the mid and small are each about 12.5%.

As you have it now, you are overweighting small and mid caps. That's OK to do. They are just more volatile. Sometimes they outperform the 500, sometimes lag it. Just so you know.

FiguringItOut

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Re: 401k investment elections
« Reply #4 on: July 09, 2015, 02:18:12 PM »
This is a fine allocation. But the Schwab fund is essentially the same as the bottom 3 Vanguard funds in your latest post put together. No harm in the duplication--just pointing it out. If you want to follow the market capitalization, and have 20% in the target retirement fund, you would have:

VANGUARD TARGET RTMT 2040 INV    20%   expense 0.18%
VANGUARD 500 INDEX ADM    60%     expense 0.05%
VANGUARD MID CAP INDEX ADM    10%     expense 0.09%
VANGUARD SMALL CAP INDEX ADM    10%     expense 0.09%

The 500 index fund makes up about 75% of the domestic market cap, and the mid and small are each about 12.5%.

As you have it now, you are overweighting small and mid caps. That's OK to do. They are just more volatile. Sometimes they outperform the 500, sometimes lag it. Just so you know.

Thank you very much.  This is very helpful.

seattlecyclone

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Re: 401k investment elections
« Reply #5 on: July 09, 2015, 02:19:17 PM »
See this link for what your Target Retirement 2040 account actually invests in. It's a combination of the Vanguard Total Stock Market Fund (which is basically the same as the Schwab version in your plan), the Vanguard Total Bond Market Fund (which is in your plan), the Vanguard Total International Stock Market Fund (which is in your plan), an the Vanguard Total International Bond Fund (which is not in your plan, but only accounts for 2.8% of the Target Retirement 2040 fund). The thing about the Target Retirement fund is that it invests in the more expensive Investor class shares of the underlying funds. To keep your fees to a minimum, you can invest in the Admiral versions of those funds yourself and save a little bit of money.

Like forummm said, there's little reason to invest in an S&P 500 fund, a mid-cap fund, and a large-cap fund while at the same time investing in a Total Stock Market fund. The Total Stock Market fund invests in the same things as the three individual funds but in a different ratio. If you want to go with market-cap weighting, stick with the Total Stock Market fund and ditch the other three. If you want to focus more on small-caps, then buy the individual funds in your preferred ratio and get rid of the Total Stock Market fund.

FiguringItOut

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Re: 401k investment elections
« Reply #6 on: July 09, 2015, 02:42:25 PM »
See this link for what your Target Retirement 2040 account actually invests in. It's a combination of the Vanguard Total Stock Market Fund (which is basically the same as the Schwab version in your plan), the Vanguard Total Bond Market Fund (which is in your plan), the Vanguard Total International Stock Market Fund (which is in your plan), an the Vanguard Total International Bond Fund (which is not in your plan, but only accounts for 2.8% of the Target Retirement 2040 fund). The thing about the Target Retirement fund is that it invests in the more expensive Investor class shares of the underlying funds. To keep your fees to a minimum, you can invest in the Admiral versions of those funds yourself and save a little bit of money.

Like forummm said, there's little reason to invest in an S&P 500 fund, a mid-cap fund, and a large-cap fund while at the same time investing in a Total Stock Market fund. The Total Stock Market fund invests in the same things as the three individual funds but in a different ratio. If you want to go with market-cap weighting, stick with the Total Stock Market fund and ditch the other three. If you want to focus more on small-caps, then buy the individual funds in your preferred ratio and get rid of the Total Stock Market fund.

Thank you.  I put on my to do list to go through these funds on Vanguard and Morning Star sites to get better understanding.  This is all very new to me.

SuperSecretName

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Re: 401k investment elections
« Reply #7 on: July 09, 2015, 02:49:37 PM »
just put it all in 2040 until you figure it out more.  you are duplicating (and messing up) the "optimal" allocation that vanguard has chosen.

you are underweighted international as you have it now.