401k help

[EconDiva]

I changed employers and previously had a target date of retirement fund with Fidelity. My new employers uses a company called Mercer. I just logged in today to elect my contributions and had no idea what to pick and how much to allocate. The top are the funds I picked (I put 20% in each). The bottom ones are additional options that I didn't pick. What are your opinions?? I'm 35 years old.

[TomTX]

No point in doing anything other than the low-expense Vanguard funds.

[mxt0133]

Look at the expense ratios, the Vanguard fund you have has .04% while all the others are .6, .7, and .80%.  So basically the other funds are charging you 20x more than the Vanguard funds.

Now compare their returns, kind of hard because you have to compare apples to apples and the funds are invested in various types of stock. But overall the Vanguard funds either do better  or are on par with the other funds with a lower expense ratio.  So in the long term you get to keep more money that will be allow to grow.

[seattlecyclone]

The Vanguard funds are all good options, depending on what you want your asset allocation to be. I probably wouldn't invest in the others, though the ones with fees below 0.5% might be worth at least considering. Investing in your employer's stock generally isn't the best idea. If the company does poorly you're likely to lose your job and a good portion of your retirement savings all at the same time...not a good combination to risk.

[EconDiva]

I didn't even know what an expense ratio was...that's just how new I am to this.

So is it safe to say my options kind of suck? I had way way more choices in the past.

So would it be reasonable to just split my contributions amongst the three Vanguard funds and call it a day?  If so, how do I choose what split is best amongst the three?

Or do I not participate in the 401k and put my funds elsewhere? 

[ZiziPB]

Definitely participate in the 401k.  It is worth it for tax deferred aspect, and if you get any kind of match, that makes it even better. 

I think the suggestion to just use the Vanguard funds is a good one.  But think about your asset allocation.  Your prior investment choice (target retirement fund) had a bonds allocation, so if you want to duplicate that you should include it in the mix as well.  So maybe something like 80% stock/20% bonds would work for you?  Maybe research that old fund and see what was in it and then try to duplicate it with what you have in the 401k?

[EconDiva]

I'm back to post my new allocations.  Thoughts? 

[EconDiva]

Definitely participate in the 401k.  It is worth it for tax deferred aspect, and if you get any kind of match, that makes it even better. 

I think the suggestion to just use the Vanguard funds is a good one.  But think about your asset allocation.  Your prior investment choice (target retirement fund) had a bonds allocation, so if you want to duplicate that you should include it in the mix as well.  So maybe something like 80% stock/20% bonds would work for you?  Maybe research that old fund and see what was in it and then try to duplicate it with what you have in the 401k?

Ok, it seems the old fund was right about at what you posted-80/20.  How do I duplicate that mix over the funds I just posted....?

[kpd905]

So is it safe to say my options kind of suck?

No, the Vanguard funds are great.  It is safe to say the options you initially chose suck.

[matchewed]

Definitely participate in the 401k.  It is worth it for tax deferred aspect, and if you get any kind of match, that makes it even better. 

I think the suggestion to just use the Vanguard funds is a good one.  But think about your asset allocation.  Your prior investment choice (target retirement fund) had a bonds allocation, so if you want to duplicate that you should include it in the mix as well.  So maybe something like 80% stock/20% bonds would work for you?  Maybe research that old fund and see what was in it and then try to duplicate it with what you have in the 401k?

Ok, it seems the old fund was right about at what you posted-80/20.  How do I duplicate that mix over the funds I just posted....?

Okay we need to dial back to some basics here. An 80/20 split means equity or stocks/bonds. Looking at the funds you listed none of those are bonds. I don't mean to be offensive with this question but you do know what bonds are right? You do know what you're investing in right?

Answer those questions and try to understand the options that are given you. Alternatively you can look at your portfolio as a whole if there are no good bond options inside your 401k you can have your bonds outside of it in an IRA/Roth IRA or other investment vehicles.

Some reading for you -
http://www.bogleheads.org/wiki/Investment_Policy_Statement
http://jlcollinsnh.com/stock-series/

You need to come up with an asset allocation that works for you and your options.

[EconDiva]

^To be completely honest with you, the only thing I really understand at this point is that I'm trying to mirror an asset allocation of 80%stock/20% bonds.  If you look at the choices I have in the attachment in the original post, I'm not sure how to identify which funds are bond funds to be honest. 

[Sonorous Epithet]

They're under the "Income/Bond" heading, and there's just the one Pimco bond fund. (My 401k also has a single Pimco bond fund).

[EconDiva]

They're under the "Income/Bond" heading, and there's just the one Pimco bond fund. (My 401k also has a single Pimco bond fund).

I just realized this.  My fairly new Fidelity Roth IRA has more bond fund choices with lower expense ratios.  Maybe I need to set that one up to be majority bonds in order to balance out my entire portfolio for the mix I'm aiming for?  I will need to talk to someone about what % bonds in the ROTH IRA would get me there, as I am unsure how to calculate this.

[matchewed]

They're under the "Income/Bond" heading, and there's just the one Pimco bond fund. (My 401k also has a single Pimco bond fund).

I just realized this.  My fairly new Fidelity Roth IRA has more bond fund choices with lower expense ratios.  Maybe I need to set that one up to be majority bonds in order to balance out my entire portfolio for the mix I'm aiming for?  I will need to talk to someone about what % bonds in the ROTH IRA would get me there, as I am unsure how to calculate this.

Add up your entire portfolio. Multiply by .2 or 20%. There you go, you know how much you need in bonds in your Roth IRA. Because you seem to need some more information I'd get on top of reading some of what I posted for a primer. You can also try to stop by a brick and mortar for Fidelity and come prepared with your entire portfolio. Talk about how you want an 80/20 asset allocation of low cost index funds and have them walk you through it. Stick with your guns if they start talking about managed funds and ask for expense ratios and how you want to minimize fees with maintaining that AA.

Then get to some reading. Having a rudimentary understanding of investment will make this much less confusing. You've had a month to start some of that research, I know the original post didn't reference any of the basics to read up on. Now you've got your chance to address that.

Outside of that the time between learning what we're talking about here and where you are now you will not screw up your savings. You can select something now and then research and address what you want based on what you learn later. You won't dig yourself into some hole and you won't hurt yourself.

[EconDiva]

They're under the "Income/Bond" heading, and there's just the one Pimco bond fund. (My 401k also has a single Pimco bond fund).

I just realized this.  My fairly new Fidelity Roth IRA has more bond fund choices with lower expense ratios.  Maybe I need to set that one up to be majority bonds in order to balance out my entire portfolio for the mix I'm aiming for?  I will need to talk to someone about what % bonds in the ROTH IRA would get me there, as I am unsure how to calculate this.

Thank you for your input.  I'm about to roll over my 403b from my current employer who always kept everything in a Targeted Date Retirement Fund, and I never bothered to research it.  I have to be more proactive now.
Add up your entire portfolio. Multiply by .2 or 20%. There you go, you know how much you need in bonds in your Roth IRA. Because you seem to need some more information I'd get on top of reading some of what I posted for a primer. You can also try to stop by a brick and mortar for Fidelity and come prepared with your entire portfolio. Talk about how you want an 80/20 asset allocation of low cost index funds and have them walk you through it. Stick with your guns if they start talking about managed funds and ask for expense ratios and how you want to minimize fees with maintaining that AA.

Then get to some reading. Having a rudimentary understanding of investment will make this much less confusing. You've had a month to start some of that research, I know the original post didn't reference any of the basics to read up on. Now you've got your chance to address that.

Outside of that the time between learning what we're talking about here and where you are now you will not screw up your savings. You can select something now and then research and address what you want based on what you learn later. You won't dig yourself into some hole and you won't hurt yourself.

[Sonorous Epithet]

Thank you for your input.  I'm about to roll over my 403b from my current employer who always kept everything in a Targeted Date Retirement Fund, and I never bothered to research it.  I have to be more proactive now.

Don't worry. Effective retirement fund investing is actually boring. Financiers and bankers are good at putting different pretty bows on pretty much the same old things. People argue about what amounts to 1 or 2 percentage points, which is nothing compared to how much a person risks by not putting money into a retirement account to begin with.

The Target Date Retirement Funds are not bad. They have a prebuilt mix. You'd have to read the prospectus to see what the mix is. No one goes broke sinking a ton of money into Target Date fund, so don't beat yourself up over it.

Personally, I am 31 and I am in 100% stocks right now. I spent a few years with bonds in the mix, and was somehow surprised that I could never beat the S&P 500. It caused me serious distress. So my strategy was simply to move to a S&P 500 index fund. It suits my personality well to know that my portfolio's performance is the benchmark. And I pay practically no money to a fund manager for the privelege. I have a more volatile portfolio than I did with a bond mix and yet I am less stressed because of it. I probably will stay 100% stocks all through my 30s.

You are searching for what works for you, and you need to be ok sticking to what works for you when you find it, because there will always be someone with a supposedly better idea. Your growing 'stache should be a source of security and joy, not stress.

[EhcatsuM]

In the most simple way Stock are for grow and bond are for income the mix depend on what is your age and when you want to retire.  If you are young and have many years to retire you can start with 100% stock for an aggressive grow and start changing the mix until you retire with at least 80% bond and 20% stock.  When you retire your bond portfolio provide income and some stock to keep it slowly growing, but the primary objective is income.