Author Topic: My vanguard 401k  (Read 3931 times)

Stlbroke

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My vanguard 401k
« on: December 23, 2014, 09:09:31 PM »
I never pay attention to this but thanks to this site i now know I need to

I'm in the 2040 fund. I only have 30k in it but two months ago changed it to 15%. Soon I will change it again so I contribute the max about half way through the year. My employer does not match

It says my ytd return is 8%.  1 year avg annual return is 10%. 5 year avg annual return is 12%

I see some other options that have much higher percentages, such as vanguard growth index fund inst.  at 14% ytd, 18% for one year, and 17% for 5 year return.

there is one that is 45,46,32.  It is "client specific" Union Pacific railroad stock fund.

Im embarrassed by this. It seems I have not gained as much as I should have. I'm assuming I need to change this ASAP?  I just always thought to do it on the default one.










r3dt4rget

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Re: My vanguard 401k
« Reply #1 on: December 23, 2014, 09:21:05 PM »
no. no. No. NO. NOOOO! Please don't fall into the active investor trap of trying to pick winners and losers, especially based only on past performance. That 2040 fund is fine. 8% YTD returns is right on the money for index investors. Any idiot can find a fund or stock that has outperformed the market, but what almost nobody has been able to do is beat the market consistently over 10, 15, 20+ years. Sure that UP stock fund is up 40% this year, but will that continue for 10 years? If it goes up 40% this year, what will you say when it tanks 30% next year? You see my point here... It's all about long term future, not YTD, 5 years, 10 years, etc. in the past.

IMO, stick with the 2040 fund.

MDM

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Re: My vanguard 401k
« Reply #2 on: December 23, 2014, 09:21:27 PM »
You will almost never pick "the" highest performing fund in advance - and are even less likely to pick it several years in a row.

Read through http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit and you may feel better.

Doesn't mean you should or shouldn't change your asset allocation, but don't beat yourself up about not having picked the winning horse in this year's race.

MDM

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Re: My vanguard 401k
« Reply #3 on: December 23, 2014, 09:22:45 PM »
And r3dt4rget and I didn't even compare notes before posting. :)

DoNorth

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Re: My vanguard 401k
« Reply #4 on: December 24, 2014, 06:05:22 AM »
that fund is fine; it's basically the Vanguard Total Stock market (US), Vanguard Total International Stock Market with 90% equities and 10% bonds (total domestic bond and total international bond).  Agree with the others as well--chasing returns will inevitably end badly.  Consistent 7%-9% returns averaged over long periods is where you want to be.

a few notes of caution however; when your balances go up you can really build that exact allocation of the 2040 through its underlying holdings with less expense.   admiral shares and shave off about .1% of the expense ratio (depending on whether or not your plan offers them as well).  Otherwise, stick with it and keep putting in every month and try to hit the IRS max of $18000/year if you can.

Stlbroke

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Re: My vanguard 401k
« Reply #5 on: December 24, 2014, 07:04:46 AM »
Thanks everyone for the advice


slugline

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Re: My vanguard 401k
« Reply #6 on: December 24, 2014, 07:59:25 AM »
If you're really young, I think either one of the Vanguard index funds mentioned should be fine. It's a matter of how aggressively you want to pursue exposure to stocks versus bonds as a percentage of your portfolio.

However, I can't emphasize enough how terribly risky it is to pick a fund that focuses on one stock -- I'm guessing the Union Pacific fund is one of those. In the 90s I used to work for a very large well-known telecom company and had that company's stock fund as one of my 401K options. If I had elected to put anything in that fund, it would be worth zero today. Any single company can suddenly collapse without warning. If you stick with well-diversified funds, you can spread that risk around.

trailrated

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Re: My vanguard 401k
« Reply #7 on: December 24, 2014, 09:54:48 AM »
Lifted from Bogleheads...but this is why you should not hunt for the funds that have recently performed well and keep switching out your 401k funds

Quote
“Top Performance lists are dangerous.” (AAII Guide to Mutual Funds)

“Using past performance numbers as a method for choosing mutual funds is such a lousy idea that mutual fund companies are required by law to tell you it is a lousy idea.” (Bill Schultheis, The Coffeehouse Investor)

“Nothing is as futile as expecting past returns to be slavishly translated into future returns on a linear basis.” (Jack Bogle in Common Sense on Mutual Funds)

“For the 20 years from 1970 to 1989, the best performing stock assets were Japanese stocks, U.S. small stocks, and gold stocks. These turned out to be the worst performing assets over the next decade.” (Bill Bernstein in Four Pillars of Investing)

“Of the fifty top-performing funds in 2000, not a single one appeared on the list in either 1999 or 1998.” (Gensler & Baer in The Great Mutual Fund Trap)

“Rating services such as Morningstar’s star awards or the ‘Forbes Honor Roll’ attest to the futility of applying past peformance to tomorrow.” (Frank Armstrong in The Informed Investor)

“Buying funds based purely on their past performance is one of the stupidest things an investor can do.” (Graham/Zweig in The Intelligent Investor)

“Again and again yesterday’s star fund has proven to be today’s disaster.” (Burton Malkiel in Random Walk Down Wall Street)

“I have examined the lack of persistency in fund returns over periods from the 1960s through the early 2000s.–There is no persistency to good performance. It is as random as the market.” (Burton Malkiel in Random Walk Guide)

“If you are going to use past performance to predict the future winners, the evidence is strong that your approach is highly likely to fail.” (Larry Swedroe in Rational Investing in Irrational Times)

“Fund rankings are meaningless when based primarily on past performance, as most are.” (Jack Brennan in Straight Talk on Investing)

“The 44 Wall Street Fund was the top performing fund over the decade of the 1970s. It ranked as the single worst performing fund of the 1980′s losing 73%.” (Larry Swedroe in The Successful Investor Today)

“A mutual fund’s past performance, which is the first feature that investors consider when choosing a fund, doesn’t predict future performance.” (Arthur Levitt in Take on the Street)

“Extensive studies by Davis, Brown & Groetzmann, Ibbotson Groetzman, and Elton et al, all confirmed there is no significant persistance in mutual fund performance.” (Ron Ross in The Unbeatable Market)

“By the time an investment reaches the top of the performance tables, there’s a good chance that its run is over. The past is not prologue.” (Andrew Clarke in Wealth of Experience)

“Numerous studies have shown that using superior past performance is no better than random selection.” (Tweddell and Pierce in Winning with Index Mutual Funds)

“Trying to pick market-beating investments is a loser’s game.” (Jonathan Clements in You’ve Lost It. Now What?)

“If you look at the top 20 U.S. equity funds during the 10 years through 1993, only one stayed in the top 100 in the subsequent 10-year period.” (Catherine Gordon, Vanguard)

“Just because last year’s hot performer seems like a hot performer today, there’s a downside to that. It can be deadly to your financial planning.” (Lipper)

“If you had invested in the annual #1 top performing stock and bond funds over the last 15 years, 80% of those top performers subsequently performed worse, over the next 3-10 years, than the average fund in their peer group.” (Eric Tyson, author of Investing for Dummies)

Exflyboy

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Re: My vanguard 401k
« Reply #8 on: December 24, 2014, 11:23:49 PM »
Yeah I workd for HP and for a  few years I was 100% in company stock. HPQ.. in fact I roled in and out and did great for nearly 2 years.. 36% in one year.

Then I rolled out and stayed out.. then HPQ collapsed to 30% of its value.

I have a few single company stocks now but they are temporary.. one is doing well now but I will eventually get out of them and stick with index funds.

Frank