Author Topic: 401k investment choices  (Read 1741 times)

alexb2746

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401k investment choices
« on: October 05, 2016, 08:12:58 AM »
So I am here looking for investment advice from my work 401k options. I can choose from the below options and/or a pre-mixed portfolio with targeted retirement date funds, from 2010 to 2055. This means I can choose what percentage to invest into each category. For an example I could choose to have 20% invested in the targeted retirement date fund and of various percentages in the below options. I did attached the PDF of my targeted retirement fund.

When I first start at the beginning of this year I simply chose the 2050 target fund as it is mainly invested in index funds, its simple and will re-invest in more stable funds later on.

I am here for the long-term as I have about 10-15 years until I am retired (I'm young early in my career and a new mustachian). So I feel stocks seem best since I can withstand the volatility and I am investing for the long-term. But should I simply stay where I am in the targeted retirement funds or maybe go a high percentage invested in the S&P 500 fund below, and a little elsewhere; or something completely different? Thanks!

Stable Value Fund
Total Expense Ratio   0.3732%
The Fund seeks preservation of principal and to provide interest income reasonably obtained under prevailing market conditions and rates, consistent with seeking to maintain required liquidity. It is designed for investors who seek little fluctuation in the value of their invested principal and low level of overall risk.

Intermediate Term Bond - Bond Fund
Net Expense Ratio 0.09%
The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Barclays U.S. Aggregate Bond Index (the "Index") over the long term.

S&P 500 Fund
Net Expense Ratio   0.06%
The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the S&P 500 (the "Index") over the long term.

Real Asset Fund
Net Expense Ratio   0.17%
The Fund seeks to approximate its custom benchmark, which is comprised of 20% Bloomberg Roll Select Commodity Index, 35% FTSE EPRA/NAREIT Developed Liquid Index, 45% Barclays U.S. Treasury Inflation Protected Securities Index.

Mid Cap Fund
Net Expense Ratio   0.08%
The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the S&P MidCap 400 Index & trade; (the "Index") over the long term.

Russell 2000 Fund
Net Expense Ratio   0.09%
The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Russell 2000 Index (the "Index") over the long term.
International Equity Fund

Emerging Markets Fund
Net Expense Ratio   0.19%
The Fund seeks to approximate the risk and return characteristics of the MSCI Emerging Markets (MSCI EM) Index. This Index is commonly used to represent the large and medium cap segment of the equity emerging markets.
« Last Edit: October 05, 2016, 08:14:45 AM by alexb2746 »

MDM

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Re: 401k investment choices
« Reply #1 on: October 05, 2016, 12:00:03 PM »
When I first start at the beginning of this year I simply chose the 2050 target fund as it is mainly invested in index funds, its simple and will re-invest in more stable funds later on.
And a very reasonable choice that was - particularly for a new investor, but also the choice of many seasoned investors.

There is no "best" choice.  Well, there is, but you'll only know what that was in hindsight.

seattlecyclone

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Re: 401k investment choices
« Reply #2 on: October 05, 2016, 12:07:25 PM »
You should think about how tolerant you are to risk and come up with an asset allocation: how much of your money do you want to have in stocks vs. bonds? How much do you want to have in US vs. international? Your plan's S&P 500 fund and Intermediate Term Bond fund look like reasonable options for the US stock and US bond pieces of your portfolio. For international stocks and bonds you may need to invest in those things through a different account if there are no low-cost options in your plan.

Until you've thought through what percentages will be the best for you, the target date fund is a very reasonable place to park your money.

Jack

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Re: 401k investment choices
« Reply #3 on: October 05, 2016, 12:17:22 PM »
Your allocation to the target date fund should either be 100% or 0%. Either you like the automatic allocation it gives you or you don't; picking it and then overriding it by owning other funds on the side doesn't make a whole lot of sense.

Otherwise, your question is not "which particular funds should I pick" but rather "what do I want my asset allocation to be?" (That question has nothing to do with expense ratios or the particular funds available in your 401k, by the way.)

After you've decided your asset allocation, then you simply buy the funds that match, while considering expense ratios. In your case, the funds in your 401k have good expense ratios so it's easy. If that weren't the case, then you might come up with a more complicated scheme where if a certain class of fund only had high expenses in your 401k, you'd leave it out of that account and fill that asset class in your IRA (or elsewhere) instead.

By the way, you missed pasting in the details for the "International Equity Fund."

alexb2746

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Re: 401k investment choices
« Reply #4 on: October 06, 2016, 06:18:20 AM »
Thanks for the responses and right I did forget the International Equity Fund. But it seems the targetfund is pretty good for now until I've come across a specific allocation into the funds below.

Since I have never see anything like these. I guess I didn't exactly know how good they really are. I would like to copy something of the Vanguard total market index fund, which I believe would be mainly the S&P 500, mid-cap, small-cap and value fund?

Jack

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Re: 401k investment choices
« Reply #5 on: October 06, 2016, 07:24:13 AM »
I would like to copy something of the Vanguard total market index fund, which I believe would be mainly the S&P 500, mid-cap, small-cap and value fund?

Yep (minus the value fund part -- just S&P 500, mid cap and Russell 2000). The methodology appears to be to find out the ticker symbols of those three funds in your plan, go to morningstar.com and create a portfolio with them, then adjust the percentages until the style box (for the overall portfolio) matches VTSMX.