Author Topic: 403b investment options (HELP!)  (Read 2779 times)

OvertheRainbow

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403b investment options (HELP!)
« on: January 27, 2016, 07:39:38 AM »
BG: 24. Just started a new job. I will be able to open up a 403b through fidelity at my job.

I have a Roth IRA through Vanguard and have maxed out two years in a row (11k). The value is down. I am invested in Target Retirement 2050 (8000 principle) and a Reit Index Fund (3000 principle).

My job offers Vanguard Target Retirement Funds (including my 2050) as well as Vanguard Retirement Income and these:

American Fund Europacific Growth Fund- Expense Ratio 0.49

Artisan Small Cap Fund Institutional Shares- Ex. Ratio: 1%

Harbor Capital Appreciation Fund - Ex. Ratio: 0.66 (I should add that this has a five-star rating on Morning Star and since inception returns of 11.45%)

Invesco diversified dividend fund Class R6- Ex Ratio:0.46 (also has a five-star rating on Morning Star and since inception returns of 13.31%)

Met life fixed income x 2- both are new. I won't be choosing these

Principal diversified Real Asset Fund class R6- Ex. Ratio 0.89 (one star rating. Won't be choosing).

Templeton Global Fund Class R6- Ex. Ratio:0.53 (won't choose this one)

Vanguard Small Cap Institutional Shares Fund- Ex. Ratio: 0.08

Vanguard International Total Stock Market Institutional Fund- Ex. Ratio: 0.12 (I most likely won't choose this as this is inside Target Retirement Funds)

Vanguard Institutional Index Fund Institutional Shares- Ex. Ratio: 0.04

Victory Integrity Small-Cap Value Fund R6- Ex. Ratio: 1.01% (however, it has had over 15% since inception returns).

 

So, what ones are sticking out to you guys? Would it be redundant to choose the Target 2050 Retirement Fund (again even though it is in my Roth)? I was thinking about putting 80% into T2050, 10% Target Income Fund and 10% into Vanguard Institutional Index Fund Instituional Shares.

20% of my income will go into my 403b. Roth is already maxed out for this year and I have a nice chunk in cash for emergencies. No debt.

Thanks!

terran

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Re: 403b investment options (HELP!)
« Reply #1 on: January 27, 2016, 07:49:28 AM »
Definitely not redundant to invest in the same target date fund you have in your IRA. That's what you're SUPPOSED to do. A target date fund is a fund of funds, so it's got all the diversification you need right there, and is meant to be your only investment (if not you're just changing your asset allocation which is something you should be doing intentionally). That's the path I would take if it were me.

If/when you ever start investing in a taxable account instead of just tax advantaged you might then consider breaking up the target date so you have stock funds in taxable and bond funds in tax advantaged. This is because stock funds are typically tax efficient (mostly taxed at capital gains rates, and then mostly when you sell), while bond funds are not (interest is taxed as regular income). You don't list bond funds in your 403b, but they're probably there, and you just didn't list them? Or they're certainly available in your IRA

OvertheRainbow

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Re: 403b investment options (HELP!)
« Reply #2 on: January 27, 2016, 07:54:32 AM »
Definitely not redundant to invest in the same target date fund you have in your IRA. That's what you're SUPPOSED to do. A target date fund is a fund of funds, so it's got all the diversification you need right there, and is meant to be your only investment (if not you're just changing your asset allocation which is something you should be doing intentionally). That's the path I would take if it were me.

If/when you ever start investing in a taxable account instead of just tax advantaged you might then consider breaking up the target date so you have stock funds in taxable and bond funds in tax advantaged. This is because stock funds are typically tax efficient (mostly taxed at capital gains rates, and then mostly when you sell), while bond funds are not (interest is taxed as regular income). You don't list bond funds in your 403b, but they're probably there, and you just didn't list them? Or they're certainly available in your IRA

Thanks for the reply.

The bond options are the metlife fixed, Metropolitan West (I forgot to add this one on the list, it has an expense ratio of 0.4%), Templeton Global and Principal diversified fund. Not very good options, imo.

pbkmaine

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Re: 403b investment options (HELP!)
« Reply #3 on: January 27, 2016, 08:19:05 AM »
What's the MetLife fixed paying in interest right now?

OvertheRainbow

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Re: 403b investment options (HELP!)
« Reply #4 on: January 27, 2016, 08:22:02 AM »
What's the MetLife fixed paying in interest right now?

It is brand new. It was started a couple weeks ago, so I don't know.

pbkmaine

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Re: 403b investment options (HELP!)
« Reply #5 on: January 27, 2016, 08:26:20 AM »
The reason I ask is that fixed accounts, depending on the way they are set up, may have low correlation with stocks, bonds AND cash. Low (and negative) correlation is the Holy Grail of investment diversification. Investment advisors are always looking for an asset class that behaves differently. Fixed accounts were one of the few ways you got positive returns in the 2007-2008 time frame. So for the risk averse, they can be a useful, small part of the portfolio.

OvertheRainbow

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Re: 403b investment options (HELP!)
« Reply #6 on: January 27, 2016, 08:37:00 AM »
The reason I ask is that fixed accounts, depending on the way they are set up, may have low correlation with stocks, bonds AND cash. Low (and negative) correlation is the Holy Grail of investment diversification. Investment advisors are always looking for an asset class that behaves differently. Fixed accounts were one of the few ways you got positive returns in the 2007-2008 time frame. So for the risk averse, they can be a useful, small part of the portfolio.

I didn't know that....hm...I think I need to look into that! Thanks!

pbkmaine

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Re: 403b investment options (HELP!)
« Reply #7 on: January 27, 2016, 04:39:18 PM »
Ask them what the current crediting rate is for the fixed account, and how often it's reset. If you want to go deeper, you can also ask what the duration of the underlying bond portfolio is, and the average credit quality.

FLBiker

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Re: 403b investment options (HELP!)
« Reply #8 on: January 28, 2016, 09:06:58 AM »
Personally, I'd go with some combination of Vanguard International Total Stock Market Institutional Fund and Vanguard Institutional Index Fund Institutional Shares rather than the target date fund, but the target date fund is fine if you're more comfortable with that.