(FXSIX) And my 401k. Help out, now with options below.

[Rusoarmo]

Still learning a lot.

My 401k through my company is through Fidelity and offers 27 (plus company stock) as my investment options for my 401k.

Previously I had it under "managed" services which I don't feel was doing great.

They currently have it split up between a ton of different small, mid and large caps

I'd like to park it and forget it essentially.

Would it be a good idea to put it all toward the SPTN 500 (FXSIX)?

[matchewed]

If you can accept the risks associated with it then it is just fine.

Those risks include; very little in the way of diversification as it is only 500 of the largest companies in the US, weighted to large cap (same as before), you might miss some sectors...etc.

But in general (not always) the S&P 500 tracks the broader market.

[matchewed]

Also what does your investment policy statement say about your asset allocation and how you will invest with that in mind?
(Hint: you should have an investment policy statement which outlines your asset allocation.)

[Frankies Girl]

Agree with matchewed - you need to have a good plan of how you want to invest, before deciding on what funds to buy.

http://www.bogleheads.org/wiki/Fidelity
^ good breakdown of what funds in Fido match up with Vanguard

http://www.bogleheads.org/wiki/Investment_policy_statement

[Rusoarmo]

I am turning 24 in February, currently putting 6% to maximize my company match (50% up to 6%). Salary is currently ~$60k not counting any bonus/benefits.

I am currently in grad school and recently bought a house unfortunately with PMI.

Goal right now is to maximize the matching benefit and focus on paying off student loans and then getting above 20% equity.

I am wanting to see at least a 7% return

[matchewed]

I am turning 24 in February, currently putting 6% to maximize my company match (50% up to 6%). Salary is currently ~$60k not counting any bonus/benefits.

I am currently in grad school and recently bought a house unfortunately with PMI.

Goal right now is to maximize the matching benefit and focus on paying off student loans and then getting above 20% equity.

I am wanting to see at least a 7% return

Seems like a decent plan.

No one can guarantee a return. It's fine outlining your situation, but it is your situation.

You have to look at what % your student loans have and weigh that against investing and anticipated (conservatively) returns. The idea is that if your anticipated returns are higher than the interest rate on your loans it is optimal to focus on investing more. When you start factoring in risk tolerance and the like though optimal may not jive with everyone.

Because your situation is unique it is up to you to determine if the fund is right for you. If I was giving general blanket advice I'd say it's just fine for your situation and that you can park your money there until you get your debts less expensive. While you're doing that feel free to learn more about investing in general.

http://jlcollinsnh.com/stock-series/ - good primer on simple investing
Browse the boards for investing books.

[Rusoarmo]

Grad loans are expensive. 6.8%

Not all at once, they come in cycles (5k sums every quarter). No refinance option as I literally just bought a house.

According to my conservative calculations, it will take me 5~6 years (not being very frugal and assuming same base salary) to be above 20% equity and no student loans. At which point main focus switches to become future investment. Of course I'll be contributing my 6% of my growing salary the whole time.

[JetBlast]

If you can accept the risks associated with it then it is just fine.

Those risks include; very little in the way of diversification as it is only 500 of the largest companies in the US, weighted to large cap (same as before), you might miss some sectors...etc.

But in general (not always) the S&P 500 tracks the broader market.

I think it's an exaggeration to say that an S&P 500 fund has little diversification. Yes, they're all large companies, but they are in a broad range of industries. Whether it's smartphones, jet engines, oil, alcohol, toothpaste, medical equipment, candy bars, cars, retailers, banks, software, waste disposal, or real estate, etc... if you have an S&P 500 fund you own it. A total market index would obviously add smaller companies and perhaps some niche industries, but I'd still consider an S&P 500 fund to be broadly diversified when only considering equities.

[matchewed]

If you can accept the risks associated with it then it is just fine.

Those risks include; very little in the way of diversification as it is only 500 of the largest companies in the US, weighted to large cap (same as before), you might miss some sectors...etc.

But in general (not always) the S&P 500 tracks the broader market.

I think it's an exaggeration to say that an S&P 500 fund has little diversification. Yes, they're all large companies, but they are in a broad range of industries. Whether it's smartphones, jet engines, oil, alcohol, toothpaste, medical equipment, candy bars, cars, retailers, banks, software, waste disposal, or real estate, etc... if you have an S&P 500 fund you own it. A total market index would obviously add smaller companies and perhaps some niche industries, but I'd still consider an S&P 500 fund to be broadly diversified when only considering equities.

It's all relative to other things.

ETA: What I mean by that is you can (and should) compare the S&P 500 to other options that are within your investing options. Also the measure of diversification is not solely on sectors. It can also just be on pure number of companies or geographical exposure. You may consider the S&P 500 to be broadly diversified when only considering equities but it is good for anyone jumping into investing to understand all options and not just one so they can make better informed decisions for themselves.

[Rufus.T.Firefly]

I used Fidelity as well. I agree with others that S&P isn't the only index fund to put your money in.

Here are two ways to do it: Fidelity also has a Total Stock Market Index, just dump it all in there. Or create your own diversification by purchasing some of the Extended Market Fund which contains mid-to-small cap stocks (just an idea: 75% in S&P and 25% in extended market). At this early stage, I wouldn't sweat anything more complicated than this.

Once you hit your other goals then you can revisit and make a more comprehensive strategy to include international markets, bonds, etc.

[Rusoarmo]

Hmm. Perhaps it would be better if I showed my current breakdown as well as the options available.

SPTN 500 INDEX INST  (FXSIX)    Stock Investments   Large Cap   19.30%
FID LOW PRICED STK K  (FLPKX)   Stock Investments   Mid-Cap           13.09%
DODGE & COX INTL STK  (DODFX)   Stock Investments   International   11.05%
FID DIVERSIFD INTL K  (FDIKX)           Stock Investments   International   9.33%
LOOMIS CORE PL BD N  (NERNX)   Bond/Managed Income   Income   7.87%
AMG SYS LG CP VAL IS  (MSYSX)    Stock Investments   Large Cap   7.05%
AMG TS MID CP GTH IS  (TMDIX)    Stock Investments   Mid-Cap           5.66%
MAINSTAY LG CAP GR I  (MLAIX)    Stock Investments   Large Cap   5.26%
GS SM CAP VALUE INST  (GSSIX)    Stock Investments   Small Cap           4.94%
SPTN INTL INDEX ADV  (FSIVX)   Stock Investments   International           4.83%
VANG TOT BD MKT INST  (VBTIX)   Bond/Managed Income   Income   3.92%
FID CONTRAFUND K  (FCNKX)    Stock Investments   Large Cap           3.42%
SPTN EXT MKT IDX ADV  (FSEVX)    Stock Investments   Mid-Cap           2.24%
COMPANY STOCK   Stock Investments   Company Stock                   2.06%


And the following is the options I have available as well as their gross expense ratio.

Name                                               Gross Expense Ratio
COMPANY STOCK   -
AMG SYS LG CP VAL IS (MSYSX)    0.9
FID CONTRAFUND K (FCNKX)           0.54
MAINSTAY LG CAP GR I (MLAIX)    0.74
SPTN 500 INDEX INST (FXSIX)            0.05
AMG TS MID CP GTH IS (TMDIX)   1.04
FID LOW PRICED STK K (FLPKX)    0.72
SPTN EXT MKT IDX ADV (FSEVX)   0.07
CONESTOGA SM CAP IS (CCALX)    1.09
GS SM CAP VALUE INST (GSSIX)   1
DODGE & COX INTL STK (DODFX)    0.64
FID DIVERSIFD INTL K (FDIKX)            0.78
SPTN INTL INDEX ADV (FSIVX)           0.17
VANG TARGET RET 2010 (VTENX)    0.16
VANG TARGET RET 2015 (VTXVX)   0.16
VANG TARGET RET 2020 (VTWNX)    0.16
VANG TARGET RET 2025 (VTTVX)   0.17
VANG TARGET RET 2030 (VTHRX)   0.17
VANG TARGET RET 2035 (VTTHX)    0.18
VANG TARGET RET 2040 (VFORX)    0.18
VANG TARGET RET 2045 (VTIVX)    0.18
VANG TARGET RET 2050 (VFIFX)    0.18
VANG TARGET RET 2055 (VFFVX)    0.18
VANG TARGET RET INC (VTINX)           0.16
MIP CL 1 09/07/1989                    0.79
LOOMIS CORE PL BD N (NERNX)   0.46
VANG TOT BD MKT INST (VBTIX)   0.06

[GGNoob]

If you only want one fund and want to "set it and forget it," I'd choose the Target Retirement fund with the date closed to when you'll be 65. This gives you global diversification of stocks and bonds. It starts at 90% stock and 10% bonds and when you are 20 years from the  retirement date, it starts getting more conservative.

[Rufus.T.Firefly]

The one's I referenced are in your list, they are as follows, with expense ratios:

- S&P 500 (FXSIX) 0.05
- Extended Market (FSEVX) 0.07

If you really want to get fancy:

- International (FSIVX) 0.17
- Total Bonds (VBTIX) 0.06

Your average expense ratio after weighting your portfolio appropriately will be below 0.10

Sure, you can pick the target retirement fund, but you've already put in this much effort, you might as well save the 0.10 on your expense ratio. Here is an example of what I mean (this is just for example purposes, you can pick your own allocation of course):

80/20 stocks/bonds

stocks breakdown: 60 S&P/25 Extended/15 International

Weighted Cost:
Bonds: 0.012
S&P 500: 0.03
Extended: 0.0175
International: 0.0255

Total Expense Ratio: 0.085

[Frankies Girl]

You said you're just now turning 24?

You have way too many funds - more funds does not equal better. It is possible to diversify holding just one fund - and since they don't have the Spartan Total Stock Market index fund in your selections, I'd also suggest selling all the crap you have now and going 95% into just one fund: VANG TARGET RET 2055 (VFFVX)    0.18

I have no idea about company stock purchases, so assume you'd want around 5% but leave that to brighter minds than mine.

You're young, you have a huge amount of time in front of you, so this one fund would probably have the best mix of equities and minimize the exposure to bonds and other drags. It contains the Vanguard total stock market and total bond market indexes and will auto rebalance as you get closer to the retirement age (in the year of 2055).

All those other funds are average/blah and not necessary, and most if not all are more expensive to own, and overlap the holdings of each other. Dump them. You just need one total market fund and that's in the target dated fund mentioned above.

[Rusoarmo]

The one's I referenced are in your list, they are as follows, with expense ratios:

- S&P 500 6(FXSIX) 0.05
- Extended Market (FSEVX) 0.07

If you really want to get fancy:

- International (FSIVX) 0.17
- Total Bonds (VBTIX) 0.0

Your average expense ratio after weighting your portfolio appropriately will be below 0.10

Sure, you can pick the target retirement fund, but you've already put in this much effort, you might as well save the 0.10 on your expense ratio. Here is an example of what I mean (this is just for example purposes, you can pick your own allocation of course):

80/20 stocks/bonds

stocks breakdown: 60 S&P/25 Extended/15 International

Weighted Cost:
Bonds: 0.012
S&P 500: 0.03
Extended: 0.0175
International: 0.0255

Total Expense Ratio: 0.085

So based off this, you're reccomending,
FXSIX - 48%
FSEVX - 20%
FSIVX - 12%
VBTIX - 20%

You said you're just now turning 24?

You have way too many funds - more funds does not equal better. It is possible to diversify holding just one fund - and since they don't have the Spartan Total Stock Market index fund in your selections, I'd also suggest selling all the crap you have now and going 95% into just one fund: VANG TARGET RET 2055 (VFFVX)    0.18

I have no idea about company stock purchases, so assume you'd want around 5% but leave that to brighter minds than mine.

You're young, you have a huge amount of time in front of you, so this one fund would probably have the best mix of equities and minimize the exposure to bonds and other drags. It contains the Vanguard total stock market and total bond market indexes and will auto rebalance as you get closer to the retirement age (in the year of 2055).

All those other funds are average/blah and not necessary, and most if not all are more expensive to own, and overlap the holdings of each other. Dump them. You just need one total market fund and that's in the target dated fund mentioned above.

Well rather turning 24 in slightly less than 6 months.

I know I am overly diversified right now.

What is the benefit of putting my 6% (plus match) exclusively into VFFVX over the broken down recommendation above? Once my loans are where I want them to be I will begin to increase my 401k contribution until I feel comfortable maxing it out. Which point I will begin an IRA.

[Rufus.T.Firefly]

So based off this, you're reccomending,
FXSIX - 48%
FSEVX - 20%
FSIVX - 12%
VBTIX - 20%

This is just an example, but its a reasonable starting point. I suggest going to the library and picking up "A Random Walk down Wall Street" or "A Common Sense Guide to Mutual Funds." A simple strategy is generally better when it comes to investing. There is good reason to keep some small percentage (10-30%) in bonds, even at our age. Those books have some good charts & graphs explaining why.

What is the benefit of putting my 6% (plus match) exclusively into VFFVX over the broken down recommendation above? Once my loans are where I want them to be I will begin to increase my 401k contribution until I feel comfortable maxing it out. Which point I will begin an IRA.

To be clear, I don't think the Target Retirement fund option is a bad idea. Its the ultimate simple and passive investing choice. If you want to "park it and forget it," then that's the way to go as Frankies Girl said.

If you want to take a bit more control of your strategy, self-selecting your portfolio weights of index funds is a good low-cost, low-risk way to do that.

[Rosy]

Grad loans are expensive. 6.8%

Not all at once, they come in cycles (5k sums every quarter). No refinance option as I literally just bought a house.

According to my conservative calculations, it will take me 5~6 years (not being very frugal and assuming same base salary) to be above 20% equity and no student loans. At which point main focus switches to become future investment. Of course I'll be contributing my 6% of my growing salary the whole time.

On the student loans - have you looked at the SoFi threads and Mr. MMMs post for refinancing your 6.8% to perhaps 3.5%?

[money_maniac]

Gonna agree with most of what PowerBroker is saying here.

My 401k only uses fidelity so an S&P 500 coupled with a spartan extended market gets me basically VTSAX with a very similar expense ratio. I also have 15% in an international index. No bonds at this point but it's all based on your risk tolerance and goals.

Vanguard target dates are also great choices. Slightly more expensive but they rebalance (if you believe in that) and they tweak their equities/bonds allocations as the fund gets closer to the target date. It's a set it and forget it kind of deal and gives you peace of mind.