401k plan, where to invest?

[astvilla]

Thanks everyone for the advice so far. Now I have another question about my 401k and where to set my contributions. I'm currently putting in 30% take home but will raise it to 40% (the max).

Vanguard Institutional Index Fund (VINIX)  ER = 0.04%. Turnover rate 5%   NAV $188.62,  YTD 13%

PIMCO Total Return Fund Administrative class (PTRAX) ER = 0.71%, Turnover rate 227%, NAV $10.94, YTD 4.04%

My company's Stable value fund, ER = 0.33%, NAV $16.91, YTD 1.8% - i think this is my money market fund i can retreat to?

American Growth fund (RGAGX) ER 0.33%, Turnover rate 26%, NAV $47.34, YTD 10.07%.

Fidelity low priced (FLPSX) ER 0.82%, redemption fee 1.5%, 90 day period, turnover 12%, NAV $50.18, YTD 6.3%

Fidelity International Discovery (FIDKX) ER 0.82%

AllianzGI Dividend value fund ANDAX ER 0.95%, (i'm interested in dividend funds/good idea? and dividend investing, good idea? i hear conflicting things about it and want to learn more about DGI, good ways to learn about DGI?)

rest are fid freedom indx funds w/years im presuming next to them like 2030, 2035, 2040, etc, ER 0.24-0.26% on all of those. a couple other small caps like MSSGX, WFSVX too.

I'm currently setting half my contribution in VINIX and half in PIMCO, asset allocation right? but bond fund seems pretty high ER or is that normal? are the other funds worth considering or do i just think about allocation %?

[drewdeezee]

Wow!  I wish my 401k had VINIX as an option.  It's a passive index fund that tracks the S&P 500 with one of the lowest expense ratios I've ever seen. https://personal.vanguard.com/us/funds/snapshot?FundId=0094&FundIntExt=INT The Vanguard info page for VINIX shows that 8 out of its 10 largest holdings are favorites among dividend growth stock investors. 


I personally have at least 50+ years ahead of me for investing and I have a high tolerance for risk so I would put 100% of my distributions into VINIX.  I'm a big fan of Jim Collins simple path to wealth http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/ and I've read his stock series several times over.  http://jlcollinsnh.com/stock-series/

[wtjbatman]

You likely won't be able to follow a DGI strategy with your 401k unless you have a self-directed/brokerage investment option. A few people do, but most don't. That said, you are currently investing in two good choices (a great stock fund and a decent bond fund). But I have to question your AA of 50/50. Are you near or at retirement? Because that's an extremely conservative AA. Personally I'm 100% stocks because I'm investing for the long term (decades), but even the average investor if they have years until retirement should follow a strategy like Age-10 in bonds. So if you're 30 years old, you would hold 80% in stocks and 20% in bonds.

Good places to begin learning about DGI are two of my favorite DG blogs:
http://www.dividendmantra.com
http://www.dividendgrowthinvestor.com

[FLBiker]

I agree that 50/50 is very conservative.

I do something more like 90/10 -- I'm 38, DW is 34.  I don't know exactly when retirement will be, but I'm thinking 7-10 years.  DW is leaving work in the spring when she has our first child, and I don't know exactly how that will affect things.

My thinking with being aggressive is this -- I'd rather be overly aggressive and end up adding months (or even a year or two) to my retirement date, with the possible benefit that my date will be significantly sooner, than be conservative and guarantee a later date.

I'd also look to simplify your holdings -- I did that a few years back, and I continue to do it as I'm able to consolidate things.

Here's my actual breakdown (minus cash)
US stock index -- 48%
INT stock index -- 36%
Bond index -- 9% (about 1/2 "regular", 1/4 TIPS, 1/4 high-income, currently almost all US)
REIT index -- 5%
other -- 2% (lending club and a vanguard metals and mining fund which I will get out of as soon as I get close to where I got in)

Personally, I'm not super into dividend investing, but some folks do it.  I'm very much in line with a boglehead approach (after years of stock picking / actively managed stocks / etc.).  I basically started from their three fund portfolio and added a REIT -- http://www.bogleheads.org/wiki/Three-fund_portfolio

The only thing I'm currently changing re: my asset allocation is to increase my % of INT bond.

[astvilla]

You likely won't be able to follow a DGI strategy with your 401k unless you have a self-directed/brokerage investment option. A few people do, but most don't. That said, you are currently investing in two good choices (a great stock fund and a decent bond fund). But I have to question your AA of 50/50. Are you near or at retirement? Because that's an extremely conservative AA. Personally I'm 100% stocks because I'm investing for the long term (decades), but even the average investor if they have years until retirement should follow a strategy like Age-10 in bonds. So if you're 30 years old, you would hold 80% in stocks and 20% in bonds.

Good places to begin learning about DGI are two of my favorite DG blogs:
http://www.dividendmantra.com
http://www.dividendgrowthinvestor.com

I wasn't sure about the bond fund, the ER seemed high on the page but stable? Do bond funds or bonds in general ever drop or drop very little compared to stocks? I imagine they are much more stable but less return.
I'm 24 and I was actually thinking of switching my allocation actually to 60/30 but maybe I'll do 70/30, I feel like my risk tolerance is low even if I'm young but I should just swallow the pill and accept some losses over time.

I wasn't thinking of doing DGI in 401k, but saw the Allianz which was about DG so not sure if good idea to get started? I have another account w/more money just sitting letting inflation waste it. I was thinking of doing some DGI w/it instead. It's taxable investment account and someone said it's good long-term, not sure if DGI would then be suitable for it? It's money already taxed and will tax on gains, this other brokerage account. 

I also have 2 Roth IRAs but wonder if I should just consolidate Vanguard and Fidelity into 1 Vanguard account? The reason I have 2 is for access to funds maybe not offered in the other but maybe there's no distinct advantage b/t say Spartan funds and Vanguard funds? If I were to do DGI, which brokerage would be better?

So do the target date funds mean anything? They say index but what does it mean to target at 2040 for example. Do they know my age and calculate? what is the date based off of? 1,000,000 by that date no matter the person? Seems pretty vague.

Wow!  I wish my 401k had VINIX as an option.  It's a passive index fund that tracks the S&P 500 with one of the lowest expense ratios I've ever seen. https://personal.vanguard.com/us/funds/snapshot?FundId=0094&FundIntExt=INT The Vanguard info page for VINIX shows that 8 out of its 10 largest holdings are favorites among dividend growth stock investors. 


I personally have at least 50+ years ahead of me for investing and I have a high tolerance for risk so I would put 100% of my distributions into VINIX.  I'm a big fan of Jim Collins simple path to wealth http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/ and I've read his stock series several times over.  http://jlcollinsnh.com/stock-series/

Oh guess not too bad offering then?! I thought it wasn't good because I don't see many posters mentioning it, mostly VTSAX. What's the difference b/t the 2? VINIX and VTSAX?

[FLBiker]

I also have 2 Roth IRAs but wonder if I should just consolidate Vanguard and Fidelity into 1 Vanguard account? The reason I have 2 is for access to funds maybe not offered in the other but maybe there's no distinct advantage b/t say Spartan funds and Vanguard funds? If I were to do DGI, which brokerage would be better?

Fidelity Spartan and Vanguard Admiral are very similar, and I like Vanguard's corporate model better.  I can't speak to the DGI-friendliness of either.

So do the target date funds mean anything? They say index but what does it mean to target at 2040 for example. Do they know my age and calculate? what is the date based off of? 1,000,000 by that date no matter the person? Seems pretty vague.

Target date funds change their allocation as the date nears.  So when you're 40 years out, you might be 80/20 stocks to bonds, but when you're 5 years out you might be 10/90.  (I made those numbers up.)  Personally, I like to control the balance myself, but if you like their allocation, there's no harm in target date index funds.

What's the difference b/t the 2? VINIX and VTSAX?

VINIX is an index of the S&P 500, which is a collection of 500 companies that are frequently used as an overall US market indicator.   VTSAX is an index of the total US stock market (meaning it's more diversified) -- the number of stocks they hold are very different (504 for VINIX vs 3784 for VTSAX), but their top holdings are very similar.  As a result, they move similarly, but not identically. 

Also, VINIX is an institutional class (available to institutions / people with more than 5,000,000) while VTSAX is admiral class (10,000 minimum, if memory serves).  Both classes have good ERs, but institutional is often better (in terms of ER) if you can get it.

[wtjbatman]

You likely won't be able to follow a DGI strategy with your 401k unless you have a self-directed/brokerage investment option. A few people do, but most don't. That said, you are currently investing in two good choices (a great stock fund and a decent bond fund). But I have to question your AA of 50/50. Are you near or at retirement? Because that's an extremely conservative AA. Personally I'm 100% stocks because I'm investing for the long term (decades), but even the average investor if they have years until retirement should follow a strategy like Age-10 in bonds. So if you're 30 years old, you would hold 80% in stocks and 20% in bonds.

Good places to begin learning about DGI are two of my favorite DG blogs:
http://www.dividendmantra.com
http://www.dividendgrowthinvestor.com

I wasn't sure about the bond fund, the ER seemed high on the page but stable? Do bond funds or bonds in general ever drop or drop very little compared to stocks? I imagine they are much more stable but less return.
I'm 24 and I was actually thinking of switching my allocation actually to 60/30 but maybe I'll do 70/30, I feel like my risk tolerance is low even if I'm young but I should just swallow the pill and accept some losses over time.

I wasn't thinking of doing DGI in 401k, but saw the Allianz which was about DG so not sure if good idea to get started? I have another account w/more money just sitting letting inflation waste it. I was thinking of doing some DGI w/it instead. It's taxable investment account and someone said it's good long-term, not sure if DGI would then be suitable for it? It's money already taxed and will tax on gains, this other brokerage account. 

I also have 2 Roth IRAs but wonder if I should just consolidate Vanguard and Fidelity into 1 Vanguard account? The reason I have 2 is for access to funds maybe not offered in the other but maybe there's no distinct advantage b/t say Spartan funds and Vanguard funds? If I were to do DGI, which brokerage would be better?

Normally you'd want a bond index fund instead of that PIMCO bond fund, but it doesn't look like you have that option in your 401k. So if you're going to invest in bonds, PIMCO is what you will have to invest in. Unless you start looking at all of your investments (401k and Roth IRAs) as one total portfolio, and divide your assets up according to whichever account you have the best options in. Which in this case, would likely be to hold 100% of your 401k in VINIX and then balance that by putting some/most/all your Roth money into a bond fund. When stocks have a large drop, traditionally bonds don't drop as much. Which gives you the opportunity to sell some of your bonds and buy stocks. That's the simple version of what diversification is all about.

I wouldn't mess around with the Allianz fund myself. Save your DGI for a brokerage account you can choose your own investments at. As for your Roths, if youre only invest in mutual funds/ETFs it doesn't matter whether your account(s) are at Vanguard or Fidelity. Both offer plenty of low cost index funds to choose from that you can purchase commission free. For DGI, I'm honestly not sure. But if I had to guess, I'd say Fidelity. It depends on how much they charge per trade. Just make sure that before you jump into DGI you understand it.

[astvilla]

You likely won't be able to follow a DGI strategy with your 401k unless you have a self-directed/brokerage investment option. A few people do, but most don't. That said, you are currently investing in two good choices (a great stock fund and a decent bond fund). But I have to question your AA of 50/50. Are you near or at retirement? Because that's an extremely conservative AA. Personally I'm 100% stocks because I'm investing for the long term (decades), but even the average investor if they have years until retirement should follow a strategy like Age-10 in bonds. So if you're 30 years old, you would hold 80% in stocks and 20% in bonds.

Good places to begin learning about DGI are two of my favorite DG blogs:
http://www.dividendmantra.com
http://www.dividendgrowthinvestor.com

I wasn't sure about the bond fund, the ER seemed high on the page but stable? Do bond funds or bonds in general ever drop or drop very little compared to stocks? I imagine they are much more stable but less return.
I'm 24 and I was actually thinking of switching my allocation actually to 60/30 but maybe I'll do 70/30, I feel like my risk tolerance is low even if I'm young but I should just swallow the pill and accept some losses over time.

I wasn't thinking of doing DGI in 401k, but saw the Allianz which was about DG so not sure if good idea to get started? I have another account w/more money just sitting letting inflation waste it. I was thinking of doing some DGI w/it instead. It's taxable investment account and someone said it's good long-term, not sure if DGI would then be suitable for it? It's money already taxed and will tax on gains, this other brokerage account. 

I also have 2 Roth IRAs but wonder if I should just consolidate Vanguard and Fidelity into 1 Vanguard account? The reason I have 2 is for access to funds maybe not offered in the other but maybe there's no distinct advantage b/t say Spartan funds and Vanguard funds? If I were to do DGI, which brokerage would be better?

Normally you'd want a bond index fund instead of that PIMCO bond fund, but it doesn't look like you have that option in your 401k. So if you're going to invest in bonds, PIMCO is what you will have to invest in. Unless you start looking at all of your investments (401k and Roth IRAs) as one total portfolio, and divide your assets up according to whichever account you have the best options in. Which in this case, would likely be to hold 100% of your 401k in VINIX and then balance that by putting some/most/all your Roth money into a bond fund. When stocks have a large drop, traditionally bonds don't drop as much. Which gives you the opportunity to sell some of your bonds and buy stocks. That's the simple version of what diversification is all about.

I wouldn't mess around with the Allianz fund myself. Save your DGI for a brokerage account you can choose your own investments at. As for your Roths, if youre only invest in mutual funds/ETFs it doesn't matter whether your account(s) are at Vanguard or Fidelity. Both offer plenty of low cost index funds to choose from that you can purchase commission free. For DGI, I'm honestly not sure. But if I had to guess, I'd say Fidelity. It depends on how much they charge per trade. Just make sure that before you jump into DGI you understand it.

Thanks for your advice and wisdom wtjbatman. I contemplated looking at all my accounts as 1 portfolio instead of thinking each account as its own portfolio and allocating asset in each account, (too much management i think) wasn't sure people do that. So if I have my 401k mostly in VINIX (which I'm planning), I should do bonds in Roth IRA? But Roth IRA isn't taxed on gains so maybe more aggressive or mix bonds/stocks and then use my extra cash not in any tax deferred account into bonds? How taxes work in relation to accounts and ideal investments in each account based off taxes is confusing me. Posters are saying certain investment vehicles are better in taxable investment account than others but I don't know why? Between stocks, bonds, index funds, dgi, which is better for taxable investment account to pay lowest taxes?

Also taxable investment account is a account where you invest your own money that is already taxed and will be taxed on any gains, right? Just making sure I have this right. And if I ever decide on doing DGI, should I do it in a taxable investment account or in my retirement accounts?

Thank you again everyone, I'm starting to get a much clearer picture in investing. It still bothers me that I'm so comfortable with essentially gambling my retirement money but it seems the only way to beat inflation.

[wtjbatman]

Thanks for your advice and wisdom wtjbatman. I contemplated looking at all my accounts as 1 portfolio instead of thinking each account as its own portfolio and allocating asset in each account, (too much management i think) wasn't sure people do that. So if I have my 401k mostly in VINIX (which I'm planning), I should do bonds in Roth IRA? But Roth IRA isn't taxed on gains so maybe more aggressive or mix bonds/stocks and then use my extra cash not in any tax deferred account into bonds? How taxes work in relation to accounts and ideal investments in each account based off taxes is confusing me. Posters are saying certain investment vehicles are better in taxable investment account than others but I don't know why? Between stocks, bonds, index funds, dgi, which is better for taxable investment account to pay lowest taxes?

Also taxable investment account is a account where you invest your own money that is already taxed and will be taxed on any gains, right? Just making sure I have this right. And if I ever decide on doing DGI, should I do it in a taxable investment account or in my retirement accounts?

Thank you again everyone, I'm starting to get a much clearer picture in investing. It still bothers me that I'm so comfortable with essentially gambling my retirement money but it seems the only way to beat inflation.

For information on where to place certain types of funds, see this wiki Bogleheads. They will do a better job of explaining it than I ever could: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

You're correct about the taxable accounts. You are taxed on dividends as you receive them and then taxed on capital gains when you sell. For DGI I would recommend you start in an IRA, and if you have additional money to open a taxable account. Dividends earned in an IRA aren't taxed, so that's the "best" place to do DGI. The downside is it takes so long (due to the yearly limit on contributions) to build up a significant stash in an IRA that throws off a lot of dividends.

Don't think of it as gambling. If you are investing wisely, and don't panic and sell when the market dips, you will have success. Think long term buy and hold.

[astvilla]

Is it a good idea to have both a Roth IRA AND a traditional IRA? It's great to save but I might need the money in the future for a house or some type of downpayment as well as savings and taxable investment account.

[wtjbatman]

Is it a good idea to have both a Roth IRA AND a traditional IRA? It's great to save but I might need the money in the future for a house or some type of downpayment as well as savings and taxable investment account.

Yep, a lot of people have different types of retirement accounts. 401k, Traditional IRA, Roth IRA, taxable, etc. Diversification can mean more than just diversifying your investment funds.