The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: wealthviahealth on November 26, 2019, 07:41:14 AM
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2 years I noticed how high the expense ratio was in my employer recommended target date fund- 2055 ( face punch I know now) so I have had all other contributions largely directed to in the index 500 fund. I have about 30k still in that target date fund and was wondering what ya'll might recommended as far as selling it and buying into the index 500 with that 30k.
I know that timing the market is silly but was wondering if folks would recommend taking a dollar cost average approach on this and selling/ buying in smaller percentages / selling it all and holding it in one of the money market esq funds and buying daily based of dips, or if I should just do it all in one swoop, or perhaps do nothing it all and keeping that 30k in the target date fund for balance.
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If I were you:
I would keep my asset allocation the same as it is now by buying bonds in my IRA when I sell my target date fund in my 401k.
Are you able to buy bond funds in your IRA in a similar amount that you would be selling by selling your target date fund?
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Yes, forgot to mention that- I also have a smaller amount allocated to bonds, international, and mix of small cap/mid cap in low cost funds in addition to the index 500 fund which gets about 85% of the contribution. My purchases could be spread across these funds in a similar percentage.
* Quick update- one thing I had not yet considered is that the target date fund does pay out a decent dividend at the end of the year- I would be missing out on that If I sold the fund now.
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I would just do it all once. If you're not comfortable doing that, then dollar cost average the change as fast as you're comfortable. A lot of the target date fund is probably the S&P 500 anyway. For example, the Vanguard 2055 TDF is 44% S&P 500 with the rest being smaller US companies, international companies, and bonds.
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How large a chunk are you comfortable switching at once? half? 1/4th? I'd switch at the pace you feel comfortable - but start. Saving on the expense ratio is the goal.
If the market tumbles next year, are you done investing? I would guess not. So a downturn should find you investing more at a better price. Don't worry about a few years of stock performance - the key thing is the decades.