Author Topic: Change my 401a Investments?  (Read 1892 times)

Making Cents

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Change my 401a Investments?
« on: January 17, 2016, 05:05:18 PM »
I have a defined contribution retirement plan (401a)through TIAA-CREF  begun in Sept 2013 where my employer contributes an additional 10-11% of my salary. I anticipate staying with this account for at least another 15 years.

When I initially set this account up, the options were so few and so poor that I just went with a target date fund (TIAA-CREF Lifecycle 2040 Fund - Institutional Class,  0.56% / 0.44% gross/net ER).

http://www1.tiaa-cref.org/public/performance/institutional/profiles/1816.html

Apparently we are finally getting access to a couple of index fund options with much lower expense ratios in a few days (see screenshot) and so I'm thinking about moving my money out of the target fund and into a few simple options with lower fees. Specifically, I'm interested in some mix of the following:

TIAA-CREF S&P 500 Index Fund (Institutional) TISPX, ER .06%

TIAA-CREF Inflation-Linked Bond Fund (Institutional) TIILX, ER 0.26%

Vanguard Small Cap Value Index Fund Admiral Shares VSIAX, ER 0.09%

Because that is all U.S., should I add in some American Funds EuroPacific Growth Fund R-6 RERGX, ER  0.49% for international exposure?


I am not prone to panicking when stocks drop, but I'm still new to controlling my own investments and lack both knowledge and confidence. I'd be grateful for any opinions (and reasons behind them) whether this seems reasonable. Could I create a portfolio that would be diversified enough if this is where around 17% of my retirement contributions are headed annually? Or should I stick with the target fund's higher ER because of the diversity?

In addition to this account, I currently contribute the max to a 401k that is in Vanguard's 2040 Instl Target Fund:

https://institutional.vanguard.com/VGApp/iip/site/institutional/investments/productoverview?fundId=1668

And I also have an IRA through Betterment that I think I'm going to transfer to Vanguard's LifeStrategy Growth Fund (VASGX) soon.

https://personal.vanguard.com/us/funds/snapshot?FundId=0122&FundIntExt=INT


Thanks in advance to anyone willing to lend time and advice.


NoStacheOhio

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Re: Change my 401a Investments?
« Reply #1 on: January 18, 2016, 11:49:13 AM »
That doesn't give you any mid-cap exposure, which you may or may not care about.

You might consider taking advantage of the best funds in each account, rather than trying to balance AA in each account.

For example, if you don't have a good, inexpensive mid-cap option (no idea what that eagle ER is) in the 401a, but your Vanguard 401k has a good fund, then put the mid-caps in the 401k.

Basically, don't look at accounts separately. Think of them as one big pile, where different pockets have different advantages and disadvantages.

Making Cents

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Re: Change my 401a Investments?
« Reply #2 on: January 18, 2016, 01:03:11 PM »
Thanks for your advice, NoStacheOhio. I will definitely have a look at all of our accounts collectively. Since both my DH and I have only target fund/lifecycle options from Vanguard in our 401k I don't think I can tweak them much, but I will be able to customize the IRAs that are through Vanguard directly.

Yeah, I wondered if I should be concerned about the lack of mid-cap. (The Eagle mid-cap ER is 0.77%, higher than I currently pay).

I guess where I'm fumbling on making a decision is that I know portfolio allocation is highly personal and so I'm seeing advice all over the place and don't totally understand the reasoning that gets you to the actual numbers. I know my style of money management and my risk tolerance but I don't know enough about the risks of different funds yet to be able to evaluate them and translate that into a pie chart that fits us. I understand the pros of index funds and low ERs, so that's easy to get on board with, and I understand the arguments behind geographic diversification, but I'm not sure how to make good decisions when it comes to percentages and market capitalization categories. If I followed Warren Buffet, I'd just throw 90% in the S&P and the rest in the bond fund and forget about it. That sounds really appealing (and cheap!), but then I don't think I want to be entirely focused on U.S. large companies in a rapidly changing global economy. Then again, I read on a really helpful advice manual linked on this forum (which unfortunately i can't remember the name of) that although a mix of 80-90% total world stock index with a 10-20% bonds is preferable, an s&P 500 index alone is fine as a substitute if that's not available because most large-caps are multi-national anyway... so I'm back to confusion over whether to just go the Buffet route.

If anyone has an example of a simple, moderately aggressive asset allocation formula that they trust, I'd be grateful. Of course i can find plenty of examples out there (which are the good ones? I have no idea), but  I've learned a lot from this forum so am curious what members here do for growth.

Thanks.

NoStacheOhio

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Re: Change my 401a Investments?
« Reply #3 on: January 18, 2016, 01:20:55 PM »
You're right, it's a highly personal decision. Just for the sake of getting started, here's a site with a bunch of predetermined portfolios, and how they've performed historically. http://portfoliocharts.com/portfolios/

Making Cents

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Re: Change my 401a Investments?
« Reply #4 on: January 18, 2016, 01:30:54 PM »
Thanks again!