Author Topic: Advice on reallocating 401(k)  (Read 1146 times)

Fraxinus

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Advice on reallocating 401(k)
« on: March 14, 2018, 08:00:10 PM »
Hi all,

I've been lurking a while, and had a question come up I'm really not sure how to address on my own. My apologies if I'm asking something that gets covered regularly.

I receive a 401(k) with match through my employer at Fidelity. Until now, I've wanted to be hands-off and went with a target-date fund. I've been doing more research in the last year and would like to reallocate those dollars to a set of lower cost index funds.

I had a plan in place... my intent was to reallocate both the 401(k) and a Roth IRA I have at Fidelity to 80% FSTVX (total market index) and 20% FSIVX (international index). I intend to rebalance things skew 10% from my targets. As time goes on, I'll re-evaluate the split and start to bring a bond portion into the mix. Pretty basic.... primarily coming from the Bogleheads forum and books. If anyone thinks my core plan needs addressing I'd love to hear it.

However, turns out my employer's plan does not include FSTVX as an option. The only large blend index fund available is FXSIX, which I presume is their S&P 500 Index. What I had liked about the total market index was that, in my understanding, it provided some exposure to mid- and small- cap companies.

The returns and costs between FSTVX and FXSIX are fairly similar, with FSTVS having a (very) small edge. However, I'm wondering if it would be in my best interest to add a mid-cap index fund to the equation. The only option is FSEVX, the "Extended Market Index". The 10-year returns are 10.16%, costs are .07%.

Ive been doing as much research as I can, but I feel my understanding of things isn't broad enough to make the judgement call of whether or not to add the mid-cap index fund to the picture.

Should I consider adding the FSEVX to the balance? If so, what kind of % would you recommend?

To further complicate matters, I DO have access to FSTVX with my IRA. The dollars are roughly 2/3 in the 401(k) and 1/3 in the IRA. I could put the entire IRA into FSTVX, and then split the 401(k) accordingly between the FXSIX (500 index) and FSIVX (international index). Would this get me adequate exposure to mid/ small cap markets?

If I'm way overthinking all of this let me know... Maybe I'm placing way to much value on the potentially increased returns... and volatility... of small and mid-cap.

For background, I'm 30 with no debt and saving roughly 45% of my income. Most of my finances are with Fidelity, between this 401(k) and roth IRA, but I have opened a general (not tax advantaged) account at vanguard to start saving some dollars for 10-15 years from now with the intent to buy a house/ property.




NoStacheOhio

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Re: Advice on reallocating 401(k)
« Reply #1 on: March 15, 2018, 06:36:14 AM »
Are you eligible for Brokeragelink within your 401k? Then you can buy anything you want, basically.

You can mix 500 and extended market to mimic total market. This post on Bogleheads did the math for a lot of common funds: https://www.bogleheads.org/wiki/Approximating_total_stock_market

Ultimately, just using the 500 fund in your 401k isn't a big deal either, especially if you have the total market fund in your IRA.

Fraxinus

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Re: Advice on reallocating 401(k)
« Reply #2 on: March 15, 2018, 07:38:35 PM »
Thanks for the link. The breakdown it offered was really helpful... after a bit more research into the extended market fund, it turned out to be pretty easy to do a split between it and the 500 index to approximate a total market index. I just finished up on Fidelity's website, and have gone from paying .75% expense ratio to somewhere around .04-.05% for a product that better fits what I'm looking for.

Thank you for the help!

NoStacheOhio

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Re: Advice on reallocating 401(k)
« Reply #3 on: March 16, 2018, 07:12:02 AM »
Thanks for the link. The breakdown it offered was really helpful... after a bit more research into the extended market fund, it turned out to be pretty easy to do a split between it and the 500 index to approximate a total market index. I just finished up on Fidelity's website, and have gone from paying .75% expense ratio to somewhere around .04-.05% for a product that better fits what I'm looking for.

Thank you for the help!

Glad you found a solution that makes you happy!

Also, welcome. We may be a little odd, but we're pretty friendly. ;)