Author Topic: Help on 401k investment choices  (Read 1301 times)

Nodip

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Help on 401k investment choices
« on: November 22, 2018, 06:09:18 PM »
Hi,

 I am new to investing and just started reading MMM and J collins stock series and looking at my investment options in 401k (have about 30k balance)for vanguard total stock market index funds  but only see the below options and don't see the ER's  for each fund and so reached out to HR to get the details but in the meantime,any help choosing the best one ? By default invested everything in 2050 Target fund and so should I move everything  to  BlackRock iShares S&P 500 Index Fund  and if I change the investment selection will there be any fees ?

Attached the List with the ER's
« Last Edit: November 23, 2018, 11:33:37 AM by Nodip »

FIREball567

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Re: Help on 401k investment choices
« Reply #1 on: November 22, 2018, 06:50:07 PM »
Either one of the target funds or the ishare S&P 500.


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RWD

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Re: Help on 401k investment choices
« Reply #2 on: November 22, 2018, 07:36:29 PM »
What are the expense ratios? I suspect S&P 500 fund has the lowest expense ratios. There shouldn't be any charge for reallocating your investments and changing your investment selection.

Steeze

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Re: Help on 401k investment choices
« Reply #3 on: November 22, 2018, 08:30:34 PM »
Sp500 is probably the lowest cost. Target date is a solid choice for a beginning investor too. Either is not a bad choice for now, I usually recommend a target date fund to people who ask me for advice in person. Focus on cutting costs and saving more, that will have the biggest impact on your portfolio.

Don't worry so much about a fund performing better by 1% a year or costing an extra 0.1% in fees when you can and should focus on saving 10% more and earning 10% more. Of course, optimization is fun too.

MustacheAndaHalf

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Re: Help on 401k investment choices
« Reply #4 on: November 23, 2018, 02:41:32 AM »
The two international funds I looked up both had 1.20% or higher expense ratios, which are too high.  Compare that to the typical S&P 500 index fund, with an 0.04% expense ratio.  The expense ratio consumes your assets every year, in order to keep the fund running.  I'd favor the S&P 500 index fund in that list.

"American" funds tend to be too expensive.  Those target date funds charge 0.84% per year, so I'd just stick with Warren Buffet's favorite investment advice: just use the S&P 500 and forget it.  When you change jobs, you can make better choices.

Note that 401(k) plans with very high fees, like yours, are actually violating the law.  They are not acting in your best interests even though they have a duty to do so.  As soon as a company lawyer with experience takes a look, the plan will change quickly.  That's cheaper than waiting for a lawsuit, which the company isn't likely to win.

It's worth reading up on the definition of "fiduciary" not just so you know it for work, but because when you invest outside work it can be significant.  Most places use salespeople, not fiduciaries, to help you with investments.

Nodip

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Re: Help on 401k investment choices
« Reply #5 on: November 23, 2018, 11:39:19 AM »
Thanks all for your response.

Modified the post to include the ER's and as expected S & P index fund has the lowest ER.

Also since I am just starting and want to mimic something like VTSAX by allocating different percentages , which one can I choose from the list and with what percentage ?

Also how do I find the TICKER Symbol for American Century Retirement Date 2050 Collective Investment Trust as the one I find ARFVX is investor class and the ER doesnt seem to match with the one from 401k list.
« Last Edit: November 23, 2018, 12:28:14 PM by Nodip »

Steeze

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Re: Help on 401k investment choices
« Reply #6 on: November 23, 2018, 03:56:39 PM »
Looks like the SP500 fund is by far the lowest cost. About 80% of the funds in VTSAX are in the SP500. You could add another 15% mid cap and 5% small cap to approximate VTSAX, but I don't think it is worth it with those expense ratios.

If I were in that situation I would go 100% SP500. Later on when you have a little extra to invest you can open an IRA at Vangaurd and invest in VTSAX there.

Steeze

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Re: Help on 401k investment choices
« Reply #7 on: November 23, 2018, 04:09:28 PM »
Also the ticker for any fund in the 401k probably will not match the share cost of the 401k, as most 401ks operate as a Collective Investment Trust. You can read about collective inveatment trusts on boggle heads forum. That's just to say that you can look at investor class for price movements to approximate, but the number of shares you hold in the 401k, cost per share, the fees, and performance can differ from the underlying mutual fund. So even if you can look up the ticker, it won't match up to what is happening in your account necessarily.
« Last Edit: November 23, 2018, 04:11:01 PM by Steeze »

Nodip

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Re: Help on 401k investment choices
« Reply #8 on: November 24, 2018, 09:38:41 AM »
Looks like the SP500 fund is by far the lowest cost. About 80% of the funds in VTSAX are in the SP500. You could add another 15% mid cap and 5% small cap to approximate VTSAX, but I don't think it is worth it with those expense ratios.

If I were in that situation I would go 100% SP500. Later on when you have a little extra to invest you can open an IRA at Vangaurd and invest in VTSAX there.

Thanks Steeze.

 I opened Roth IRA account at vanguard ,maxed out for the year and brought VTSAX as the market is down and when I talked to the 401k provider they said that I can direct the future investments to SP 500 and so will do that for now and also they mentioned they dont have any ticker symbol for the Collective Investment Trust