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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Big Sleep on June 23, 2017, 06:28:23 PM

Title: 401k Fund Setup
Post by: Big Sleep on June 23, 2017, 06:28:23 PM

Setting up wife's new 401k. Lots of good Vanguard funds. The rest are not so good. The only int'l option has a 0.80 ER, so I'm going to stick with US stocks and bonds. VBTLX is what I'm going with for bonds. My question is on stocks. My options are 1) straight VFIAX, or 2) VFIAX/VIMAX/VSMAX. Which would be the better choice? I'm leaning towards the latter, however if I do, what % of each would weight it properly?

Title: Re: 401k Fund Setup
Post by: Guide2003 on June 23, 2017, 07:42:04 PM

Certainly not a pro at this, but I'd think something between 70/15/15 and 50/25/25 is what I would lean towards. Looks like VFIAX has the lowest ER so I'd be inclined to lean that way.

This is purely based on what I've seen recommended for TSP allocations from a few different sources, and it looks like you have greater flexibility than we have with the 5 basic funds in the TSP.

Title: Re: 401k Fund Setup
Post by: Nothlit on June 23, 2017, 08:40:22 PM

https://www.bogleheads.org/wiki/Approximating_total_stock_market

Title: Re: 401k Fund Setup
Post by: COEE on June 25, 2017, 02:55:24 PM

I used to use Large/Mid/Small Cap funds like you're talking about.  But then I realized that the S&P is around 80% of the market and that they tend to be pretty much the same thing in the long run.  You might do a little better if you balance properly between the three (with the hope that the mid and small caps outgrow the large caps (and in theory they should)) - but is it worth your time, having more to track, etc?

I also didn't have low ER to chose from in my L/M/S cap funds - so that saved me a good bit when going to a S&P fund.  But you have good funds to chose from so it's a bit more of a toss up in my mind. 

My experience has also been that my 401k's had either S&P or Total Market funds with good ER's, not both.  So I've defaulted to just using which ever one is offered.

Finally - it can be to your advantage to hold your international stock in a taxable account for the foreign tax credit benefits as well.  https://www.bogleheads.org/wiki/Tax-efficient_fund_placement#Step_3:_Placing_international_stock_funds_in_the_taxable_account