Diversifying 401k and Roth IRA?

[Lis]

2017 was the first year I maxed out both my 401k and my Roth IRA - wooo! I'm on track to do the same again this year (and for the rest of my years!), so I figure now's a good time to take a look at what I'm actually investing in, because I didn't really have any idea what I was doing when I opened these accounts, other than it was a good idea to have them.

Me: 27 years old
401k @ Fidelity (opened in May/June 2013): ~$80,000 - 100% in Target Retirement 2055 (FHFAX)* - Fund fee 1%
Roth IRA @ Vanguard (opened May 2015): ~$15,000 - 100% in Target Retirement 2055 (VFFVX) - Fund fee 0.15%

*(for shits and giggles, I literally just changed 5% of future contributions to Harbor Capital Appreciation Fund Institutional Class (HACAX) after preliminary talks of diversifying with a friend and because the 1/3/5/10 year returns seemed pretty high, and I found it amusing that my 401k plan offered it when it has a $50k buy in elsewhere. This won't take effect until my next contribution hits, which should be mid next week. Fund fee 0.7%)

The only investing I'm doing *currently* is through these two accounts (the rest of my savings is being put away for a future down payment). Now that I'm at a good spot financially with my 401k and my IRA, I want to learn more about what I'm actually investing in, and if it should change. Right now, they're both at 90% stocks, and I get they'll shift as I age. I also get the mustachian mentality is a bit riskier and it's more common to have more stocks for longer periods of time, but does that include your 401k, or just other investment accounts? Or just personal preferences?

Friend also tried to persuade me to get a bunch of high yield bonds in my IRA. The search function for MRM forum is still wonky, but general google search for MRM forum and high yield bonds tells me the consensus seems to be no?

Discussion/advice appreciated!

[Lis]

These are the 401k investments that are available to me. Sorry that they're not the easiest to read...
Edited to add: expense ratios listed first
            
0.58%   CBA LG CAP VAL I (SAIFX)05/29/1958      Stock Investments      Large Cap
0.21%   DREY INST S&P500 I (DSPIX)09/30/1993      Stock Investments      Large Cap
0.64%   FA LARGE CAP I (FALIX)02/20/1996      Stock Investments      Large Cap
0.70%   HARBOR CAP APPR INST (HACAX)12/29/1987      Stock Investments      Large Cap
0.27%   COL MID CAP INDEX I2 (CPXRX)03/31/2000      Stock Investments      Mid-Cap
0.86%   OPPHMR MS MID CAP Y (OPMYX)08/02/1999      Stock Investments      Mid-Cap
0.98%   FA SM CAP VAL I (FCVIX)11/03/2004      Stock Investments      Small Cap
0.73%   JPM US SMALL CO R6 (JUSMX)11/04/1993      Stock Investments      Small Cap
1.18%   COL EMRG MKT I2 (CEKRX)01/02/1998      Stock Investments      International
0.96%   FA INTL DISCOVERY I (FIADX)12/31/1986      Stock Investments      International
1.43%   INVS DEVELOP MKTS A (GTDDX)01/11/1994      Stock Investments      International
1.33%   JPM INTL EQUITY A (JSEAX)12/31/1996      Stock Investments      International
1.01%   MFS INTL VALUE R3 (MINGX)10/24/1995      Stock Investments      International
1.32%   OPPHMR DEV MKTS A (ODMAX)11/18/1996      Stock Investments      International
0.82%   FA REAL ESTATE I (FHEIX)09/12/2002      Stock Investments      Specialty
0.74%   FA FREEDOM 2005 A (FFAVX)11/06/2003      Blended Investments      N/A
0.78%   FA FREEDOM 2010 A (FACFX)07/24/2003      Blended Investments      N/A
0.83%   FA FREEDOM 2015 A (FFVAX)11/06/2003      Blended Investments      N/A
0.87%   FA FREEDOM 2020 A (FDAFX)07/24/2003      Blended Investments      N/A
0.91%   FA FREEDOM 2025 A (FATWX)11/06/2003      Blended Investments      N/A
0.95%   FA FREEDOM 2030 A (FAFEX)07/24/2003      Blended Investments      N/A
1.00%   FA FREEDOM 2035 A (FATHX)11/06/2003      Blended Investments      N/A
1.00%   FA FREEDOM 2040 A (FAFFX)07/24/2003      Blended Investments      N/A
1.00%   FA FREEDOM 2045 A (FFFZX)06/01/2006      Blended Investments      N/A
1.00%   FA FREEDOM 2050 A (FFFLX)06/01/2006      Blended Investments      N/A
1.00%   FA FREEDOM 2055 A (FHFAX)06/01/2011      Blended Investments      N/A
1.00%   FA FREEDOM 2060 A (FDKPX)08/05/2014      Blended Investments      N/A
0.72%   FA FREEDOM INC A (FAFAX)07/24/2003      Blended Investments      N/A
0.76%   FA STABLE VALUE10/02/19967 day yield as of01/31/2018   1.46%      Bond Investments      Stable Value
0.61%   DREY INTM TERM INC I (DITIX)02/02/1996      Bond Investments      Income
0.87%   FA EMERG MKT INC I (FMKIX)03/10/1994      Bond Investments      Income
0.50%   FA INVST GRD BOND I (FGBPX)08/06/1971      Bond Investments      Income
0.95%   MAINSTAY HI YD BND A (MHCAX)05/01/1986      Bond Investments      Income
0.42%   FID GOVT MMKT (SPAXX)02/05/19907 day yield as of01/31/2018   0.98%      Short-Term Investments      N/A

[terran]

All you need for a well diversified portfolio is between 1-4 broad based index funds, each one matching the overall market for the following areas (in order): US Stocks, US Bonds, International Stocks, International Bonds. Target date funds do all 4 in good proportions as they are a fund of funds that holds the underlying funds in all 4 areas and adjusts the proportions to be less risky as you approach the target date. They're a great option for tax advantaged accounts, but they're not the most tax efficient option, so if/when you start investing in taxable you may want to consider other options.

With fidelity you need to be careful that the fund has the word "index" in it as they also have lots of actively managed funds with much higher expense ratios. For example what you're invested in, Fidelity Advisor Freedom 2055 Fund FHFAX = bad with a 1% expense ratio, but Fidelity FreedomŽ Index 2055 Fund FDEWX = good with a 0.15% expense ratio.

You might want to post up all the fund options available to you in your 401k including fund name, ticker symbol, and expense ratio as people will be much more able to help you then. Focus on options with "Index" in the name. I see you just did this, so go back and add expense ratios so people don't have to look them up to help you.

[Lis]

Thank you, terran! I've updated my initial post to show the expense ratios. Basically, in terms of expense ratios, pretty much any of them are better (with a few exceptions).

So clearly the answer, for Fidelity at least, is to get out of the target fund and into others. Should I just be looking into expense ratios when looking into the domestic/international stocks and bonds, or should I be looking to 1/3/5 year performance as well?

[terran]

I'd put your 401k in 0.21% DREY INST S&P500 I (DSPIX) to the extent that you can while still maintaining an asset allocation that's acceptable to you. It's a little on the expensive side for an S&P 500 index (Vanguard's version as a 0.04% expense ratio), but not awful, and definitely better than your other options. The S&P 500 is the 500 largest US based companies, so it tracks very closely with the whole US economy, but doesn't have representation from the small companies.

I would probably buy bonds to the extent you want them in your IRA. There are proponents of 100% stocks, and I'm pretty close to being one of them, but anywhere from 10-30% bonds would probably be reasonable. 

Then add international stocks (VTIAX is good since you're at vanguard) in a proportion of 30-40% of all your stocks, also in your IRA.

Then I would focus on rounding our your US stocks with more small companies to make up for the S&P 500 fund in your 401k. You could also do this before adding any international too. The Bogleheads wiki has some suggestions of things you can pair with an S&P 500 fund to approximate the total stock market.

[frugaliknowit]

Study this website:  https://paulmerriman.com/.  It's an encyclopedia of risk management.

What I do (I am older, you should follow 100% stocks if you can stomach the downturns):  http://paulmerriman.com/mutual-funds/ (in my case Vanguard).

Others will say that's too many equity funds.  Well, over a long period of time, it's worth the trouble (higher returns with the same risk, probably 1% better...). 

[Laura33]

Do NOT focus on performance.  All that will tell you is what sector of the market has been hot or cold.

The way to do it is to figure out what asset allocation you want -- stocks/bonds/cash/real estate/etc., domestic vs. international, small/medium/large-cap, etc. -- and then find low-cost funds that will implement that.  For stocks, you want index funds, not actively-managed funds; those will tend to have the lowest fees.  A S&P 500 index is probably sufficient for what you need.

If you don't have the time/energy to figure out your preferred asset allocation and research the various options, you can just stay in a target-date fund.  Those are specifically designed to manage your asset allocation for you.  But if you do that, (i) pick the lowest-cost fund appropriate for your risk tolerance (1% is high), and (ii) do not then start throwing money into other different types of funds -- the target-date fund is supposed to provide you the "right" asset allocation, so if you start to invest in other stuff too, you are making your portfolio more or less aggressive than you originally planned.

FWIW, if you have the stomach for it, at your age you would probably do just fine putting 100% in stocks.  But if you'd freak and sell if the market went down 30%, then stick with the target date fund or some more conservative asset allocation.