Author Topic: How do you allocate your 401k investments?  (Read 5286 times)

isbjshaffer

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How do you allocate your 401k investments?
« on: September 16, 2014, 04:17:47 PM »

Index Funds, Small Caps, Employer stocks, High Yield Bonds, Oh my!


I'm thinking about Changing mine to...

High Yield Bonds 25%

Index Funds 20%

Large Cap Growth Fund: 15%

Mid Cap Growth Fund : 20%

Small Cap Value Fund : 20%


What do you think? Too aggressive? What does your 401k look like??

seattlecyclone

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Re: How do you allocate your 401k investments?
« Reply #1 on: September 16, 2014, 04:25:17 PM »
It depends. What are the funds available to you, exactly? What are the expense ratios? Don't invest in some high-fee actively-managed small cap fund if you have perfectly good broad market index funds available!

Do you have other assets outside of your 401(k) plan? Consider your whole portfolio as a whole, and allocate your money tax efficiently (in a nutshell, prefer to put bonds and REITs in a retirement account, prefer to put stocks [especially international ones] in a taxable account).

DollarsAndDissonance

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Re: How do you allocate your 401k investments?
« Reply #2 on: September 16, 2014, 04:31:45 PM »
My current employer's 401(k) fund options are mostly high-fee, so I have 100% in the 0.09%-fee Schwab S&P 500 fund.  I figure it's not a big deal since my overall allocation is stock-heavy anyway, and I can roll my 401(k) into an IRA with more diversification options when I leave the company.

surfhb

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Re: How do you allocate your 401k investments?
« Reply #3 on: September 16, 2014, 04:43:22 PM »

Index Funds, Small Caps, Employer stocks, High Yield Bonds, Oh my!


I'm thinking about Changing mine to...

High Yield Bonds 25%

Index Funds 20%

Large Cap Growth Fund: 15%

Mid Cap Growth Fund : 20%

Small Cap Value Fund : 20%


What do you think? Too aggressive? What does your 401k look like??

What kind of index funds? 

It's important to diversify without over lap.    I think you have some overlap going on and are paying more then you should in expenses.

We need the funds and ER available to give any kind of advice :)

Also company stock is overlapping as well since you're already invested by work there

RetireAbroadAt35

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Re: How do you allocate your 401k investments?
« Reply #4 on: September 16, 2014, 04:52:09 PM »
Keep it simple.

Across all my accounts - 401k, Roth IRA, taxable, I hold only the following four funds:
  • VBTLX - Total Bond Market Index - 20%
  • VTSAX - Total Stock Market Index - 65%
  • VGTSX - Total International Stock Index - 5%
  • VGNSX - Vanguard REIT Index - 10%

The REIT and most of the bonds are in the 401k/IRA.  The taxable account is weighted towards stocks.  I use the bogleheads principles for tax-efficient allocation.


surfhb

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Re: How do you allocate your 401k investments?
« Reply #5 on: September 16, 2014, 04:54:05 PM »
Keep it simple.

Across all my accounts - 401k, Roth IRA, taxable, I hold only the following four funds:
  • VBTLX - Total Bond Market Index - 20%
  • VTSAX - Total Stock Market Index - 65%
  • VGTSX - Total International Stock Index - 5%
  • VGNSX - Vanguard REIT Index - 10%

The REIT and most of the bonds are in the 401k/IRA.  The taxable account is weighted towards stocks.  I use the bogleheads principles for tax-efficient allocation.

My ROTH is identical to yours.    I wish those funds were in my 401k too.   

tracipam

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Re: How do you allocate your 401k investments?
« Reply #6 on: September 16, 2014, 04:55:33 PM »
I am trying to keep all my investments roughly 30 Large cap, 30 small cap, 30 international, 10 bonds.  I have more of my large cap in the 401K because that's the cheapest option in the 401K choices. 

Beric01

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Re: How do you allocate your 401k investments?
« Reply #7 on: September 16, 2014, 04:59:59 PM »
Keep it simple.

Across all my accounts - 401k, Roth IRA, taxable, I hold only the following four funds:
  • VBTLX - Total Bond Market Index - 20%
  • VTSAX - Total Stock Market Index - 65%
  • VGTSX - Total International Stock Index - 5%
  • VGNSX - Vanguard REIT Index - 10%

The REIT and most of the bonds are in the 401k/IRA.  The taxable account is weighted towards stocks.  I use the bogleheads principles for tax-efficient allocation.

I like your username! (I plan to retire abroad at 33).

I have Vanguard total international stock and total bond market indexes in my 401(k) (my 401(k) actually has VBTIX - institutional shares!), but total domestic stock market is not available, only the S&P 500 index fund. So I buy my VTSAX in my Roth IRA and taxable accounts at Vanguard to complete my asset allocation.

My VTSAX should increase faster than my bonds in my 401(k), so eventually I'll be able to change my Roth IRA into having some international stocks or bonds as well.

Managing your asset allocation across 3 accounts with taxes to manage and limited fund availability in the 401(k) can make things complicated, but it's worth it, and sure feels awesome when you get everything figured out.

Malaysia41

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Re: How do you allocate your 401k investments?
« Reply #8 on: September 16, 2014, 05:07:38 PM »

Index Funds, Small Caps, Employer stocks, High Yield Bonds, Oh my!


I'm thinking about Changing mine to...

High Yield Bonds 25%

Index Funds 20%

Large Cap Growth Fund: 15%

Mid Cap Growth Fund : 20%

Small Cap Value Fund : 20%


What do you think? Too aggressive? What does your 401k look like??
IMO, you're too young to have such a large % in bonds.  I'd put all or nearly all in equity.  Make sure the fees on those funds are low (if they are over .5% that is too high).  You should be able to put your money in a total market fund or S&P fund for a .1% fee. 

Beric01

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Re: How do you allocate your 401k investments?
« Reply #9 on: September 16, 2014, 05:12:54 PM »

Index Funds, Small Caps, Employer stocks, High Yield Bonds, Oh my!


I'm thinking about Changing mine to...

High Yield Bonds 25%

Index Funds 20%

Large Cap Growth Fund: 15%

Mid Cap Growth Fund : 20%

Small Cap Value Fund : 20%


What do you think? Too aggressive? What does your 401k look like??
IMO, you're too young to have such a large % in bonds.  I'd put all or nearly all in equity.  Make sure the fees on those funds are low (if they are over .5% that is too high).  You should be able to put your money in a total market fund or S&P fund for a .1% fee.

If you look at some estimates, there's really not much benefit going beyond 80/20 (what I'm allocated right now), and a lot more volatility. IMO 80/20 makes a lot of sense for the 60+ years I'll have the money (and withdrawing 4%), but please feel free to correct me if you think I'm wrong.

wtjbatman

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Re: How do you allocate your 401k investments?
« Reply #10 on: September 16, 2014, 05:43:52 PM »
To the OP, I wouldn't call an AA with 25% in Bonds too aggressive. Also, you say 20% is in index funds... uh, what type? Because technically 100% of my 401k is in "index funds", but as you can see, they are actually in 5 completely different types of funds.

60% Large U.S. Equity (S&P 500 equivalent)
20% Small U.S. Equity (Russel 2000 equivalent)
10% International Equity (5% Emerging Markets, 5% Developed Markets)
10% REIT

I considered adding bonds, but the research shows more equities = higher return, just with more volatility. As I'm in it for the long haul and don't mind volatility... equities it is.

isbjshaffer

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Re: How do you allocate your 401k investments?
« Reply #11 on: September 16, 2014, 05:55:57 PM »
Wow guys thanks for all the response! Tbh, don't kill me, I didn't even know there WERE fees associated with any of it! Glad I asked! The index funds are the s&p index funds. And what do you mean by 80/20?

seattlecyclone

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Re: How do you allocate your 401k investments?
« Reply #12 on: September 16, 2014, 06:05:18 PM »
Wow guys thanks for all the response! Tbh, don't kill me, I didn't even know there WERE fees associated with any of it! Glad I asked! The index funds are the s&p index funds. And what do you mean by 80/20?

I don't think there's any such thing as "the S&P index funds." The S&P 500 is a list of 500 companies, not a mutual fund in and of itself. Companies with names like Vanguard, Fidelity, and many more offer funds that own stock in these 500 companies, but each fund takes different amounts of money out of your investment in fees (look for the "expense ratio" on your fund documentation to know how much this fee is).

DollarsAndDissonance

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Re: How do you allocate your 401k investments?
« Reply #13 on: September 16, 2014, 06:15:02 PM »
Wow guys thanks for all the response! Tbh, don't kill me, I didn't even know there WERE fees associated with any of it! Glad I asked! The index funds are the s&p index funds. And what do you mean by 80/20?

Your company's 401(k) provider should be able to provide you a prospectus document for each fund, which will include an expense ratio (usually stated as a percentage, but sometimes as a $ per thousand figure).  For passive index investing, these fees are one of the few variables you can control, which is why many people around here are fans of Vanguard's funds, which tend to have some of the lowest fees.

80/20 refers to stock/bond mix.  That's a relatively standard mix for someone with a long time horizon.  Going beyond 80% stocks would add marginally to your historical return, but also adds substantially more risk.

Beric01

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Re: How do you allocate your 401k investments?
« Reply #14 on: September 16, 2014, 06:23:38 PM »
I asked! The index funds are the s&p index funds. And what do you mean by 80/20?

I'm sorry, I shouldn't be using abbreviations. I was talking about the ratio of stocks to bonds. It appears your portfolio is currently a 75/25 portfolio, that is 75% stocks 25% bonds. Mine is 80% stocks 20% bonds, so very similar to yours.

Just remember, as you increase your exposure to stocks you can increase your potential gains, but you also increase your risk and volatility. Hence my comment that I think going beyond 80/20 opens up too much volatility for the potential increase in gains, though I'm open to changing my mind.