Author Topic: 401K offers Vanguard - what to pick?  (Read 7001 times)

Zikzin

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401K offers Vanguard - what to pick?
« on: February 08, 2017, 04:20:04 PM »

My 401K (John Hancock) doesn't match but I decided to contribute 10% towards it. So with that said, I've found some Vanguard funds but don't know which one to pick:

Aggressive Growth:
Vanguard Mid-Cap Growth ETF - expense ratio 1.24
Vanguard Small -Cap Growth Index - expense ratio 1.18
Vanguard Small Cap Value Index - expense ratio 1.18

Growth:
Vanguard Growth Index Fund - expense ratio 1.18

I have invested 100% toward the Vanguard growth index fund. Is this good?


Big in Japan

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Re: 401K offers Vanguard - what to pick?
« Reply #1 on: February 08, 2017, 08:59:23 PM »
Those expense ratios are kind of shitty.

Bimmy

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Re: 401K offers Vanguard - what to pick?
« Reply #2 on: February 08, 2017, 09:02:30 PM »
We are invested in VTSAX- JL Collins did a really good write up on it (and stocks in general). His series has a better explanation than I can give in a post.

Link - http://jlcollinsnh.com/stock-series/

MDM

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Re: 401K offers Vanguard - what to pick?
« Reply #3 on: February 08, 2017, 09:16:12 PM »
Can you list all your 401k options?  John Hancock does have a reputation of ridiculously high expenses, so these may be your best, but...?

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #4 on: February 09, 2017, 08:13:28 AM »
Can you list all your 401k options?  John Hancock does have a reputation of ridiculously high expenses, so these may be your best, but...?

Yes please list all, there must be better options that index 500 or total market with lower expense ratios.   I hope there are anyway...

Hotstreak

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Re: 401K offers Vanguard - what to pick?
« Reply #5 on: February 09, 2017, 08:49:35 AM »
I wouldn't invest in a "growth" index, I would invest in a total stock market or S&P 500 + some international stocks (then add bonds if you feel you need them).  Those specialty "growth" index's are usually more expensive.  My 401k has exclusively Vanguard funds and all of the index's have expense ratio's less than 0.20.

gReed Smith

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Re: 401K offers Vanguard - what to pick?
« Reply #6 on: February 09, 2017, 09:03:30 AM »
The growth fund is a good fund, but it's not as broadly diversified as an S&P 500 fund or a total stock market fund.  Its top holdings are Apple, Google, Amazon, Facebook and Comcast.  So that is a little tech heavy.  To compare, the S&P 500's top 5 are Apple, Exxon, GE, Chevron and IBM.  The S&P 500 has about 500 companies (508 currently), and the growth fund has 323 companies.  That is not a radical difference.

Also, a total market fund would hold more mid-caps and small-caps.  I believe there are 0 small caps in the S&P 500.

I recommend you list all of the available funds and their expense ratios.  I'm sure you'll get great advice.  Vanguard isn't the only good fund company.  You should consider Fidelity, Schwab and Blackrock funds too.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #7 on: February 09, 2017, 09:29:59 AM »
   JH Ret To 2060 - ER 1.28
   JH Ret To 2055 - ER 1.28
   JH Ret To 2050 - ER 1.28
   JH Ret To 2045 - ER 1.28
   JH Ret To 2040 - ER 1.28 
   JH Ret To 2035 - ER 1.28 
   JH Ret To 2030 - ER 1.28
   JH Ret To 2025 - ER 1.28
   JH Ret To 2020 - ER 1.28


Aggressive Growth      


     DFA U.S. Small Cap Fund - ER 1.47
     Vanguard Mid-Cap Growth ETF  - ER 1.24

     Vanguard Small Cap Grow Index - ER 1.18
     Vanguard Small Cap Value Index  - ER 1.18


Growth

     Fidelity Adv Diversified Stock 134 - ER 1.47 Large Blend
Franklin Templeton   - ER 1.84 World Stock
     Lord Abbett Value Opps Fund - ER 1.77 Mid-cap Blend    
     Massachusetts Investors Fund -ER 1.32 Large Growth
     New Perspective Fund - ER 1.55 World Stock
       Templetown World - ER 1.66 World stock
     Vanguard Growth Index Fund - ER 1.18 Large Growth
     Washington Mutual Investors - ER 1.40 Large Value
     WisdomTree MC Dividend ETF - ER 1.54 Mid-cap Value
« Last Edit: February 09, 2017, 09:31:31 AM by Zikzin »

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #8 on: February 09, 2017, 09:35:23 AM »
So I'm thinking of sticking to Vanguard but need to diversify instead of 100% growth, Should I go for 50% Small Cap Value or Small cap Index, then 50% Vanguard Growth? 

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #9 on: February 09, 2017, 09:44:24 AM »
100% your plan administrator should be fired....


Maybe thats extreme, but so is only offering growth stocks.    Growth stocks are great, but after reading "the intelligent investor"  growth stocks arent for me. Id much rather have a basic 500 index or market index.


But that's irrelevant since its not an option for you.


Perhaps others will provide useful information for your situation.  Overall I'm not satisfied with the offerings available and dont know what to suggest.

Edit:  My biggest complaint is with the expense ratios... Just to make that clear.
« Last Edit: February 09, 2017, 09:46:38 AM by Kroaler »

Proud Foot

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Re: 401K offers Vanguard - what to pick?
« Reply #10 on: February 09, 2017, 10:20:09 AM »
Are those all of your investment options?  Are there not any John Hancock investments other than the target date ones?

Hotstreak

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Re: 401K offers Vanguard - what to pick?
« Reply #11 on: February 09, 2017, 10:34:08 AM »
Wow, your options are not great.  Given those options, I would only contribute as much as required to get the full company match, then switch to maxing my IRA and HSA before considering putting more funds in the 401k.

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #12 on: February 09, 2017, 11:29:27 AM »
From the OP, I dont think there is any company match. 

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #13 on: February 09, 2017, 11:39:01 AM »
Im just going to drop this here.  Its the ideal way to invest money.

However in your situation, there is no 401k match.   

I dont have any advice, but here is the link.

http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/msg1333153/#msg1333153

Spicolli

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Re: 401K offers Vanguard - what to pick?
« Reply #14 on: February 09, 2017, 11:42:06 AM »
So since there is no match, should the OP start with a Max contribution to an IRA (and one for his/her spouse if married) and then put any leftovers in the company 401K?

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #15 on: February 09, 2017, 11:47:03 AM »
My goal was to utilize my 401K as my pre tax investment then do the ROTH.

So max 18K to 401K
Roth for me and husband
so we can use the ROTH for ER funds and not worry about the rollover 401K until we are of retirement age.

husband dont have 401K option by the way.

I read on JLcollins with MadFientist's explanation that 401K is still better since its pre-tax and it can grow much better than post tax.

see addendum 1:
http://jlcollinsnh.com/2013/06/28/stocks-part-viii-b-should-you-avoid-your-companys-401k/

did this change recently? I've read this awhile back.

NoStacheOhio

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Re: 401K offers Vanguard - what to pick?
« Reply #16 on: February 09, 2017, 11:50:55 AM »
So since there is no match, should the OP start with a Max contribution to an IRA (and one for his/her spouse if married) and then put any leftovers in the company 401K?

Probably, but it depends on their income level.

My goal was to utilize my 401K as my pre tax investment then do the ROTH.

So max 18K to 401K
Roth for me and husband
so we can use the ROTH for ER funds and not worry about the rollover 401K until we are of retirement age.

husband dont have 401K option by the way.

I read on JLcollins with MadFientist's explanation that 401K is still better since its pre-tax and it can grow much better than post tax.

see addendum 1:
http://jlcollinsnh.com/2013/06/28/stocks-part-viii-b-should-you-avoid-your-companys-401k/

did this change recently? I've read this awhile back.

Why Roth? If your husband works and doesn't have access to a employer plan, he's eligible to deduct contributions regardless of income.

dandarc

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Re: 401K offers Vanguard - what to pick?
« Reply #17 on: February 09, 2017, 11:52:04 AM »
So since there is no match, should the OP start with a Max contribution to an IRA (and one for his/her spouse if married) and then put any leftovers in the company 401K?
Yep, assuming OP can deduct tIRA contributions.  Particularly with the shitty offerings in the 401K (not so shitty as to avoid it all-together, but invest in the better deal first).

This is also an illustration of how even with decent underlying funds, an administrator can make a 401K lousy.  Example - you can buy VISGX with a 0.2% ER at vanguard, yet they've tacked on another .98% in fees in this 401K. 

OP - you might be a catalyst for change at your company if you take up the "the 401K could be so much better" cause and convince the owners or managers to make a change.

dandarc

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Re: 401K offers Vanguard - what to pick?
« Reply #18 on: February 09, 2017, 11:55:19 AM »
Why Roth? If your husband works and doesn't have access to a employer plan, he's eligible to deduct contributions regardless of income.
Not strictly true - the limit for a full tIRA deduction is $98K MAGI for spouse who has retirement plan and $184K MAGI for spouse who doesn't (2016 figures - probably bumped up a bit for 2017).

Depending on income, Zikzin might be planning on backdoor Roth's and didn't mention it.  If it is regular Roth contributions, then yeah, probably husband's tIRA is fully deductible.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #19 on: February 09, 2017, 12:02:21 PM »
Why Roth? If your husband works and doesn't have access to a employer plan, he's eligible to deduct contributions regardless of income.
Not strictly true - the limit for a full tIRA deduction is $98K MAGI for spouse who has retirement plan and $184K MAGI for spouse who doesn't (2016 figures - probably bumped up a bit for 2017).

Depending on income, Zikzin might be planning on backdoor Roth's and didn't mention it.  If it is regular Roth contributions, then yeah, probably husband's tIRA is fully deductible.

Currently were 166K combined, might go up again with promotion at work, Yes I have been emailing and offering my help to review the 401K at work, I am definitely working towards making a change, this was set up a long time ago and nobody bothered to review after.

I still have to learn about Backdoor Roth, Husband have been contributing to a TIRA but I just realized we have more pretax funds and not much post tax, I want to start building after tax money for funds to use for ER and let pre tax money grow much longer.

dandarc

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Re: 401K offers Vanguard - what to pick?
« Reply #20 on: February 09, 2017, 12:11:08 PM »
So yeah, your husband can just go traditional IRA, and you can go regular Roth IRA at that income - no need for the backdoor.

You may want to also look at this:

http://www.gocurrycracker.com/roth-sucks/

Of course the only way to know for sure is in hindsight, but traditional at high incomes is a pretty awesome deal.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #21 on: February 09, 2017, 12:21:39 PM »
So yeah, your husband can just go traditional IRA, and you can go regular Roth IRA at that income - no need for the backdoor.

You may want to also look at this:

http://www.gocurrycracker.com/roth-sucks/

Of course the only way to know for sure is in hindsight, but traditional at high incomes is a pretty awesome deal.

Thanks Dandarc! so do you think it's still good to max my 401K after i cover others? which vanguard funds?

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #22 on: February 09, 2017, 01:36:32 PM »
Is this useful for fund picking?

https://www.bogleheads.org/wiki/Approximating_total_stock_market


At this point I think the goal is to make the best of your limited options.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #23 on: February 09, 2017, 01:45:03 PM »
Is this useful for fund picking?

https://www.bogleheads.org/wiki/Approximating_total_stock_market


At this point I think the goal is to make the best of your limited options.

Thanks for this! Just realized we dont even have JHancock 500 Index fund available.  I think I will exhaust all other options and throw in any extra to 401K to take advantage of the pre-tax option.

MDM

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Re: 401K offers Vanguard - what to pick?
« Reply #24 on: February 09, 2017, 01:57:56 PM »
...do you think it's still good to max my 401K after i cover others?
See To 401k or not to 401k? That is the question. for how to approach this.

Kroaler

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Re: 401K offers Vanguard - what to pick?
« Reply #25 on: February 09, 2017, 02:09:34 PM »
...do you think it's still good to max my 401K after i cover others?
See To 401k or not to 401k? That is the question. for how to approach this.

Great Link!  I now have a new rule of thumb for my toolbox.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #26 on: February 09, 2017, 02:34:09 PM »
...do you think it's still good to max my 401K after i cover others?
See To 401k or not to 401k? That is the question. for how to approach this.

Thanks so much! now I feel much better

GoBigRed

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Re: 401K offers Vanguard - what to pick?
« Reply #27 on: February 09, 2017, 02:41:28 PM »
Wow these expense ratios are expensive. 

I did not see this below, but I would recommend figuring out your Investment Policy Statement (see https://www.bogleheads.org/wiki/Investment_policy_statement) and determining your asset allocation (see https://www.bogleheads.org/wiki/Asset_allocation).  From that you can then determine what funds to invest in.

 Everyone will have different allocations and statements, and what works for you may not work for everyone else. Only you can make that decision.  For me, I hold 10% Bonds, 20% International and 70% US. Some hold 100% US through VTSAX. There are tons of threads on the arguments for or against various allocations.  As others mentioned, I would recommend reading JLCollins Stock Series as he does a great job on this topic. http://jlcollinsnh.com/stock-series/.   

If you determine 100% stocks is your asset allocation, and assuming you want no international funds. These are some great articles on replicating VTSAX.
Here is a great article from JLCollins which may be helpful to you. http://jlcollinsnh.com/2013/05/02/stocks-part-xvii-what-if-you-cant-buy-vtsax-or-even-vanguard/
He lists VTSAX as having 81% Large cap (an S&P 500 fund or in your instance the growth fund index), 6% Mid cap and 13% Small cap.  Bogleheads shows the allocation as 81%/4%/15% between the 3.  https://www.bogleheads.org/wiki/Approximating_total_stock_market

One issue in trying to replicate VTSAX is that most of your funds are either Value or Growth, and more heavily on growth.  You also have no S&P 500 Index fund. If you wanted 100% stocks, you could probably have a mix of vanguard funds to try and replicate VTSAX, although it would not be exact.  Likely some combination of the below:

     Vanguard Growth Index Fund - ER 1.18 Large Growth
     Vanguard Mid-Cap Growth ETF  - ER 1.24
     Vanguard Small Cap Grow Index - ER 1.18
     Vanguard Small Cap Value Index  - ER 1.18

Are the target date funds really your only options for investing in bonds?  I am usually against target date funds, but given your particular options you have listed, I would likely go with a target date fund.  Your international choices are expensive in comparison, so this would also allow for some international exposure at a lower expense ratio.  Whether or not you choose or want bonds or international funds would be up to your risk tolerance and asset allocation.  The Hancock 2060 fund appears to track the Vanguard 2060 fund pretty close and provides for better diversification.   
 

gReed Smith

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Re: 401K offers Vanguard - what to pick?
« Reply #28 on: February 09, 2017, 02:45:54 PM »
With those fund choices, I would use the appropriate Target Date fund.  They are the most diversified portfolio you can make out of those options, and the expense ratio is only a little bit higher.

GoBigRed

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Re: 401K offers Vanguard - what to pick?
« Reply #29 on: February 09, 2017, 02:47:39 PM »
So since there is no match, should the OP start with a Max contribution to an IRA (and one for his/her spouse if married) and then put any leftovers in the company 401K?

Not to mention, no rebalancing.

desertadapted

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Re: 401K offers Vanguard - what to pick?
« Reply #30 on: February 09, 2017, 03:05:37 PM »
I feel as though I need a remedial class in expense rations.  I just looked at Vanguard Growth Index Fund Investor Shares (VIGRX) on the interwebs and saw an expense ratio of 0.22%.  That's on the  high end of Vanguard index fund expense ratios.  Most of the ER's for my Vanguard index funds are under 20 basis points.  Did I not read the OP correctly?  Is there something I'm missing?

GoBigRed

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Re: 401K offers Vanguard - what to pick?
« Reply #31 on: February 09, 2017, 03:27:58 PM »
I feel as though I need a remedial class in expense rations.  I just looked at Vanguard Growth Index Fund Investor Shares (VIGRX) on the interwebs and saw an expense ratio of 0.22%.  That's on the  high end of Vanguard index fund expense ratios.  Most of the ER's for my Vanguard index funds are under 20 basis points.  Did I not read the OP correctly?  Is there something I'm missing?

The OP's 401K plan provider (John Hancock) has an upcharge for selling the Vanguard funds.  If he were to go through Vanguard directly, it would be 0.22% or whatever the expense ratio is for the fund on Vanguard's website.  Some plan providers charge the same as Vanguard and some charge much more (as in the case of OP).     

gReed Smith

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Re: 401K offers Vanguard - what to pick?
« Reply #32 on: February 09, 2017, 03:54:21 PM »
I feel as though I need a remedial class in expense rations.  I just looked at Vanguard Growth Index Fund Investor Shares (VIGRX) on the interwebs and saw an expense ratio of 0.22%.  That's on the  high end of Vanguard index fund expense ratios.  Most of the ER's for my Vanguard index funds are under 20 basis points.  Did I not read the OP correctly?  Is there something I'm missing?

John Hancock, like all 401k providers, charges for the service in addition to expense ratios.  Most likely, OP's employer opted to have the costs of running the 401k rolled into the expense ratios.  These are still way better ratios than my 401k.  Too bad IRA limits are so low; we have to use expensive 401ks to get the exact same service we could get with an IRA.

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #33 on: February 09, 2017, 04:36:18 PM »
Here's JHancock's Target Date 2060 allocation, do you think this fund is better that just splitting all 4 Vanguard Funds? (Mid Cap, Small Cap Growth, Small Cap Value, Vanguard Growth all at 25%) :

Allocations
as of 12/31/2016
Category   Holding (manager)   Total (%)

U.S. large-cap equity
Strategic Equity Allocation U.S. Large Cap Sleeve (JHAM)   35.94
MSCI U.S.A. Minimum Volatility ETF (BlackRock)   2.55
Dividend Appreciation ETF (Vanguard)   1.70
Subtotal   40.19
International equity
Strategic Equity Allocation International Sleeve (JHAM)   27.09
Subtotal   27.09
Intermediate-term bond
Total Bond Market ETF (Vanguard)   6.98
Intermediate-Term Corporate Bond ETF (Vanguard)   2.15
Investment Grade Bond ETF (BlackRock)   0.50
Subtotal   9.63
High-yield bond
High Yield Bond ETF (SSgA)   5.50
Subtotal   5.50
Sector
Information Technology ETF (Vanguard)   1.42
Health Care ETF (Vanguard)   0.86
Financial Sector ETF (SSgA)   0.72
Energy ETF (Vanguard)   0.64
REIT ETF (Vanguard)   0.63
Materials ETF (Vanguard)   0.21
Subtotal   4.48
U.S. mid-cap equity
Strategic Equity Allocation U.S. Mid Cap Sleeve (JHAM)   4.36
Subtotal   4.36
U.S. small-cap equity
Strategic Equity Allocation U.S. Small Cap Sleeve (JHAM)   3.32
Subtotal   3.32
Emerging-market equity
FTSE Emerging Markets ETF (Vanguard)   2.55
Subtotal   2.55
Bank loan
Senior Loan ETF (Invesco)   2.00
Subtotal   2.00
Short-term bond
Short Term Government Income Fund (JHAM)   0.88
Subtotal   0.88

gReed Smith

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Re: 401K offers Vanguard - what to pick?
« Reply #34 on: February 09, 2017, 05:43:05 PM »
Here's JHancock's Target Date 2060 allocation, do you think this fund is better that just splitting all 4 Vanguard Funds? (Mid Cap, Small Cap Growth, Small Cap Value, Vanguard Growth all at 25%) :


Holding the 4 vanguard funds a 25% each would be grossly out of proportion to the total market.  You would want to do something like 85% Growth, 5% Midcap and 5% each of the small cap funds.  That would be closer to the balance of a total market fund.  That would be an ok way to go.

I still recommend the target date funds though.  I did look at the allocation before I recommended it.  It's a staggeringly large number of underlying funds, and is unnecessarily complex, but it's not a bad fund.  No one can say it's not diversely invested.  It's about 80% stocks and 20% bonds.

GoBigRed

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Re: 401K offers Vanguard - what to pick?
« Reply #35 on: February 09, 2017, 06:12:17 PM »
What level of bonds do you want in your overall portfolio? You need to determine what level of bonds you are happy with in your overall portfolio.  If you have assets or investments outside of the 401K, this should also be considered. 

Each of the target date funds will likely have different allocations between bonds/stocks.  The lower the year, generally the more bonds it should hold.  Match the target date to the level you have determined suits your investing goals. 

Zikzin

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Re: 401K offers Vanguard - what to pick?
« Reply #36 on: February 10, 2017, 07:23:05 AM »
What level of bonds do you want in your overall portfolio? You need to determine what level of bonds you are happy with in your overall portfolio.  If you have assets or investments
outside of the 401K, this should also be considered. 

Each of the target date funds will likely have different allocations between bonds/stocks.  The lower the year, generally the more bonds it should hold.  Match the target date to the level you have determined suits your investing goals.

Perfect!  thanks so much!