The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: King Stilts on June 14, 2016, 07:45:24 PM
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Hello friends and fellow mustachians, I've been a lurker on this board for quite some time now but really am into the position to make a long-term commitment to a 401(k) fund provided by my employer that I plan to keep funding until my eventual (and hopefully reasonable) retirement.
The main things I have learned from this board is that high fees are my mortal enemy, so I will be deliberately excluding the high fees that come along with the T. Rowe Price Target Date Funds that have fees over 1%. In fact, I'll be leaving out any funds that have fees over .50% because there are good investments that I can pick and choose instead.
I am really leaning towards dumping almost everything (about 10% of my paycheck) into the Vanguard Small Cap Index and opening up a separate Roth IRA where I can diversify myself further into international stocks, a large cap fund, and perhaps a bit into bonds. My company matches up to 10% of my investment no matter how much I invest, which I believe is great! (right???) But I do not feel properly diversified holding only small cap US stocks. Any help is greatly appreciated!!! Thanks for welcoming me into the community!
I am looking at:
----Core Funds----
DFA Large Cap Value - 0.27%
Company Stock Fund - 0.17%
Fifth Third Equity Index Collective - 0.05%
Dodge & Cox Income Fund - Bond - 0.44%
Vanguard Small Cap Index Inst - Small Cap - 0.08% (good returns given fees)
Vanguard Prime Money Market Fund - Money Market - 0.10% (hasn't shown great returns)
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The Fifth Third Equity Index Collective sounds like an Index fund (probably tracking the S&P 500). At 0.05% ER, I'd consider it.
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The Fifth Third is an S&P 500 fund. The Vanguard Small Cap is self explanatory. Both are excellent, low-cost options. Be thankful you have great options, and yes, the match is excellent!
Decide on an overall asset allocation, perhaps creating an IPS (http://www.physicianonfire.com/you-need-an-investor-policy-statement/), and invest accordingly.
If the 401(k) will be the bulk of the portfolio, I would recommend the S&P500 fund. Small caps are not a bad option either, but you can expect more volatility and uncertainty from the asset class, possibly an upside in long-term return, but that's far from a given.
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I have my US equities split between the Vanguard SP500 fund and the S&P Completion fund, which is pretty similar to what you'd get with the 5/3 plus Vanguard small cap fund (missing some midcap exposure).
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So if I am understanding you guys correctly, my best options are investing the majority (say 8/10) into the Fifth Third fund, the remaining 2/10 into the Small Cap, and perhaps buy some Vanguard Mid-cap (perhaps VIMSX or VO ETF) while eventually entering into international stocks and the bond market once I save some more money since I just started. I really want to get into saving at least 15% of my paycheck or up to 30% as my rent for my apartment is still dirt cheap.
Oh and thanks for the link, PhysicianOnFIRE, that was a very good read. Everyone else same thing, I really appreciate it and anyone else please chime in!!!