I'd like some 401k allocation help

[Luigi]

So, I will finally be eligible for my company's 401k come October (technically August, but open enrollment won't be until October), so I'm a little excisted about that.  As such, I've begun to look at what I can invest it in.  Sadly, it's through First Mercantile, and not Vanguard, and none of the funds I've already read about here and elsewhere are offered, save for Vanguard's total bond index.  As such, I have decided to inquire the investors here, who have much more experience and knowledge than myself.
So, my first question is going to be where do you guys think I should put my money?  For what it's worth, for long term investing, I feel comfortable with moderately aggressive investments.  I don't mind having some money in riskier areas, but not a huge portion of it.

I'll add here all the info that seems to be relevant.  I'd add all links to save space, but some of these funds I can't find anywhere (maybe I don't know where to look).

1) FMT Lifestyle Income and Conservative Growth
-Expense ratio appears to be 1.27
-Risk level 4/8 and consists 25% equity funds, 60% fixed income funds and 15% cash

2) FMT Lifestyle Moderately Conservative Growth
-Expense ratio is 1.33
-Risk level 5/8 and consists 45% equities, 50% fixed income and 5% cash

3)FMT Lifestyle Moderately Aggressive Growth
-ER is 1.40
-Risk 6/8, consists of 75% equity funds, 25% fixed income

4) FMT Lifestyle Aggressive Growth
-ER 1.43
-Risk 8/8, 92% equity, 8% fixed income

5) FMT SSGA US Treasury Money Market
-ER 1.11
-Risk 1/8, all T-bills, notes, bonds
-SSGXX

6) FMT FFTW Income Plus
-ER 1.24
-Risk 1/8

7) FMT Vanguard Total Bond Market Index
-ER 1.01
-Risk 4/8, bond index
-VBTSX

8) FMT American Beacon Large Cap Value INST
-ER 1.51
-Risk 6/8, Large market cap US companies
-AADEX

9) FMT Vanguard Value Index
-ER 1.01
-Risk 6/8, large cap, value stocks
-VVISX

10) FMT DFA US Large Company
-ER 1.01
-Risk 6/8, Basically the S&P500
-DFUSX

11) FMT Vanguard Growth Index
-ER 1.01
-Risk 6/8, large cap, growth stocks
-VIGSX

12) FMT Vanguard Selected Value
-ER 1.29
-Risk 6/8, Medium size companies, whose stocks have fallen out of favor with investors
-VASVX

13) Vanguard Midcap Index
-ER 1.01
-Risk 7/8, Mimics the MSCI US Mid Cap 450 Index
-VMISX

14) DFA US Small Cap Value
-ER 1.43
-Risk 7/8, >80% assets in small cap companies
-DFSVX

15) DFA US Micro Cap
-ER 1.43
-Risk 8/8, >80% assets in micro cap companies
-DFSCX

16) FMT Small Cap Aggressive Growth (CCI/CUPPS)
-ER 1.57
-Risk 7/8, small cap investing in early identification of positive earnings

17) DFA International Value
-ER 1.36
-Risk 7/8, Invests in countries with developed markets and 'value stocks'
-DFIVX

18) DFA International Cap Value
-ER 1.62
-Risk 8/8, looks like DFIVX above, but small cap only
-DISVX

19) DFA Emerging Markets Core Equity
-ER 1.58
-Risk 8/8, emerging markets
-DFCEX

20) DFA Real Estate Securities
-ER 1.09
-Risk 7/8, What appears to be mostly commercial REITs
-DFREX


I have some thoughts, myself, but I'd like to know what you guys think.  Thanks in advance!

[icefr]

So, I will finally be eligible for my company's 401k come October (technically August, but open enrollment won't be until October), so I'm a little excisted about that.  As such, I've begun to look at what I can invest it in.  Sadly, it's through First Mercantile, and not Vanguard, and none of the funds I've already read about here and elsewhere are offered, save for Vanguard's total bond index.  As such, I have decided to inquire the investors here, who have much more experience and knowledge than myself.
So, my first question is going to be where do you guys think I should put my money?  For what it's worth, for long term investing, I feel comfortable with moderately aggressive investments.  I don't mind having some money in riskier areas, but not a huge portion of it.

Wow...all of these look like they have way high expense ratios. Even the funds that have 'Vanguard' or 'Index' in the name...

Beyond that, these are the ones that I would consider using. Their expense ratios are "only" 1.01% and mostly look like index funds. At the very least, the bond fund is no worse than the S&P 500 fund! (I'm good at optimism...)

7) FMT Vanguard Total Bond Market Index
-ER 1.01
-Risk 4/8, bond index
-VBTSX

10) FMT DFA US Large Company
-ER 1.01
-Risk 6/8, Basically the S&P500
-DFUSX

We can help you a bit more if you'll answer the following questions:

1) What kind of match do you get?
2) What tax bracket are you in?
3) If you had a perfect 401(k), how much would you put in? (The max is $17,500 for the tax year 2013.)

[bUU]

It should be noted that both DFUSX's and VBTSX's ER is 0.10% per the prospectuses, so if you're really being charged 1.01% for each you can see clearly how much your employer/custodian is skimming off for themselves.

[grantmeaname]

You should see about convincing your HR department to switch 401k plan custodians. How big is the company?

[Khan]

Absolutely terrible expense ratio nonsense, I'd bring that up to HR if I were you.

D.F.A./Vanguard funds, take your pick of your own risk tolerance.

[Luigi]

The answers to all these questions are: I get a 25% match from my employer up to $17,500 (so they'd match 4375).

My tax bracket?  I don't know for sure, I gross 30,000 salary, but my wife is working, too, so it might end up in the 25% bracket.  An IRA and 401k contributions should bring me back down to 15%, I would think. 

My company is medium-sized.  Don't really know how many employees, as we've got a lot of contract workers, but I'd estimate 400 or so (counting them, who I don't believe get 401k).  As for the rest, maybe 100 to 200 employees that aren't contract (to my knowledge).

If I had a perfect 401k, not quite sure what that would be, but if I had one set of funds that I was stoked about or whatever, with the income I get, I'd shoot for 500/month at the least.  I'd like more, but my wife is not too keen on the fact that this is a retirement account, and wants the money now (she's frugal and all, but she's not too keen on investing where the returns aren't immediate, or close to it).  With a match like this, I'd prefer to do 1000/month, but I'd never convince her.  Unless I was making 60k a year, instead.


As a note, before I looked further into the expenses for this post, I was thinking that the ratios were not terrible.  Then I looked more closely and saw that it was 1%, not 0.1% or something.  I was kind of shocked and almost amused.  I'd have been, were this not my money being toyed with like that.

I never thought about the possibility of changing custodians.  I have no idea what all that entails, so the thought never crossed my mind.  I might ask the benefits admin as to why we go here, since the ERs are so high.  If FMT keeps the money, and the business doesn't get any, I wonder if we could move to Vanguard or somewhere nicer.  A man can dream, anyway.

Thanks for the help, guys, I really appreciate it.  I'll let you know how it goes when I talk to the benefits lady.  Would be cool if I succeeded in getting something better.  Wish me luck!

[bUU]

Perhaps this'll make you feel a little better... it's the choices in my company's 401k:

Code: [Select]

PIMCO Total Return R PTRRX 1.1 %
BlackRock Eqty Dividend R MRDVX 1.32 %
BlackRock S&P 500 Index A MDSRX 0.57 %
Goldman Sachs Growth Opp Svc GGOSX 1.51 %
Delaware Small Cap Value R DVLRX 1.72 %
Goldman Sachs Mid Cap Value Svc GSMSX 1.25 %
Oppenheimer Developing Markets Fund N ODVNX 1.87 %
Thornburg International Value Fund R3 TGVRX 1.6 %
BlackRock Global Allocation R MRLOX 1.49 %
Invesco Charter R CHRRX 1.37 %
Delaware Limited-Term Divrs Income R DLTRX 1.27 %
Ivy Small Cap Growth R WSGRX 1.67 %
Lord Abbett Alpha Strategy Fund R2 ALFQX 2.04 %
American Century LIVESTRONG 2015 R ARFRX 1.3 %
American Century LIVESTRONG 2025 R ARWRX 1.36 %
American Century LIVESTRONG 2035 R ARYRX 1.41 %
American Century LIVESTRONG 2045 R ARORX 1.48 %
AC Asset Alloc Ports LVSTR Income Port R ARSRX 1.27 %
Retirement Reserves(7dayYield:0.0%) MLIKX 0.68 %
Prudential Short-Term Corporate Bond R JDTRX 1.27 %
Pioneer Strategic Income R STIRX 1.44 %
PIMCO Real Return R PRRRX 1.12 %
Templeton Global Bond R FGBRX 1.16 %
Wells Fargo Adv Large Cap Growth Fd R STMFX 1.51 %
Note how our stable value fund is earning a whopping 0.0% - effective rate of return NEGATIVE 0.68%, before factoring in the rate of inflation. I'm sure glad they extended that to tenths of a percent.

To be fair: That's from back in February, and some of those ERs went down in the last few months. MDSRX (the only index fund) is gone, replaced by an index fund that there's very little historical data on BSPAX (I think), but it's ER is 0.45%. For an index fund. Uh huh. Amazing.

And no company match. Yeah.

Anyway, a warning: Tread carefully when questioning the choice of custodian and funds within. I'm pretty much bulletproof at work, and still got the evil eye from the CEO when I questioned the choice of custodian. Remember it is a business decision that someone in authority in your company made. The fact that the decision is rapacious toward employees is not something that they want necessarily discussed in a group meeting. (I doubt the recent changes were attributable to my raising a stink back in February. They practically contorted themselves into a pretzel to avoid meeting with me to hear my concerns, and in the end, the meeting never happened.)

[2527]

Your expense ratios are high.  So only put enough to get your company's full match.  Any additional funds should go into an IRA or Roth IRA with Vanguard, which will get you much lower expenses.

As for what to buy, I go for a diversified portfolio of all stocks.  They have the highest long term return and market fluctuations don't scare me.

[bUU]

Your expense ratios are high.  So only put enough to get your company's full match.  Any additional funds should go into an IRA or Roth IRA with Vanguard, which will get you much lower expenses.

Advice that fails to factor in the compounded gains on the portion of the extra $16,500 per year I can invest pre-tax, in a 401k, that would otherwise go toward paying the tax.

[Rural]

With a match like that? Put in every penny you can. That's a huge raise, and the expense ratio, even if you can't convince them to make any changes at all, doesn't begin to approach the benefit of the 25% (!!!!) match. You're making a 25% return in the first minute, and then you get to watch 125% of your money start to compound.

Think your wife would go for $600 a month? Them maybe next year it would be okay to raise it to $650 a month?  :)

[Luigi]

With a match like that? Put in every penny you can. That's a huge raise, and the expense ratio, even if you can't convince them to make any changes at all, doesn't begin to approach the benefit of the 25% (!!!!) match. You're making a 25% return in the first minute, and then you get to watch 125% of your money start to compound.

Think your wife would go for $600 a month? Them maybe next year it would be okay to raise it to $650 a month?  :)

I'll see if I can't get her on board for 600.  And I like the way you think, just dialling up a little bit every so often

Haven't had a chance to ask the benefits administrator about the custodian, and after buu's advice, I'll wait a little bit to see if I can't figure out a really nice and casual way to ask about it.