401k account allocation

[VaCPA]

My 401k isn't horrible, but isn't great(like my wife's). It's through Principal. They have some proprietary index funds with lower ERs but still around .3%. The target date fund is about .8% ER. Anyways I was considering two different allocation methods :

1. Put it all in my target date fund(.79% ER). It would give me a good diversified mix including international exposure but higher fees than I'd like to spend.

2. 10% bond fund(.67% ER), 30% Largecap S&P 500 index(.3% ER), 30% Midcap S&P 400 index(.3% ER), 30% Smallcap S&P 600 index(.3% ER). Downside is no internation exposure, but the international funds have very high ERs(well over 1%).

What say you?

[seattlecyclone]

If all the bond funds in your 401(k) have such high fees (over .5%), you may want to go with 100% stocks in the 401(k) and buy bonds in your IRA or other account. You don't need to have each account perfectly match your desired asset allocation.

Also if you want to use large/mid/small cap funds to approximate a total market fund like VTSAX, use an 80/10/10 ratio. Equally weighting each fund will mean you're actually tilting pretty heavily toward small- and mid-cap stocks. This is a perfectly valid thing to do, but you should be aware that you're doing it!

[Travis]

If all the bond funds in your 401(k) have such high fees (over .5%), you may want to go with 100% stocks in the 401(k) and buy bonds in your IRA or other account. You don't need to have each account perfectly match your desired asset allocation.

Also if you want to use large/mid/small cap funds to approximate a total market fund like VTSAX, use an 80/10/10 ratio. Equally weighting each fund will mean you're actually tilting pretty heavily toward small- and mid-cap stocks. This is a perfectly valid thing to do, but you should be aware that you're doing it!

Agreed. Skip the bond fund since the ER is so high and find one of your choosing for your IRA.  There are a few investing agencies that buy ETF categories in equal weights, but there's no clear analysis that it does any good compared to being weighted like the total market.

[VaCPA]

Makes sense. Thanks guys

[Chuck]

.3% is not horrible at all. My S&P500 fund is .55% through John Hancock.