Need help with 401k work plan elections

[FrenchStache]

Hello Mustachians,

I need help with my work plan elections.  I currently have 25% allocated to each of the funds in bold.  I didn't know if it was too complicated or should I stick with the vanguard funds only.  The vanguard funds were recently added to the list which is great in my opinion.  Let me know what you think.

REREX   AMERICAN EUROPACIFIC GROWTH R4 - 0.84%   
PRDSX   DIVERSIFIED SMALL-CAP GROWT - 0.85%   
JDVFX   JOHN HANCOCK DISCIPL VALUE R4 - 1.07%
JDEAX   JPMORGAN DISCIP EQUITY A  - 0.96%
RPMGX   MID-CAP GROWTH FUND - 0.77%
TRMCX   MID-CAP VALUE FUND - 0.80%
PRWAX   NEW AMERICA GROWTH FUND - 0.79%
ODVYX   OPPENHEIMER DEVELOP MARKETS, Y  - 1.06%
OSMYX   OPPENHEIMER INTL SM MID CO Y  - 0.97%
PURZX   PRUDENTIAL GLOBAL REALESTATE Z  - 0.97%
TASVX   PRUDENTIAL QMA SM CAP VALUE Z  - 0.69%   
VFIAX   VANGUARD 500 INDEX ADMIRAL  + - 0.05%   
VIMAX   VANGUARD MID-CAP IND- ADMIRAL  - 0.09%   
VSMAX   VANGUARD SMALL CAP INDEX, ADM - 0.09%   

Thanks!

[GrowingTheGreen]

You've got some selections with fairly high expense ratios.  I mean... seriously.  Holy cow.  You only have three options that are below 0.5 percent!  This is what really pisses me off about plan providers.

If I were in your shoes, I'd be in VFIAX (70%), VIMAX (20%), VSMAX (10%).

[johnny847]

I would absolutely switch to some of the Vanguard funds. The funds you're currently in are expensive! What GTG suggested is great. Using just VFIAX is okay too if you don't care to rebalance b/w three funds (but really, rebalancing is not hard).

[MDM]

I need help with my work plan elections.  I currently have 25% allocated to each of the funds in bold.  I didn't know if it was too complicated or should I stick with the vanguard funds only.  The vanguard funds were recently added to the list which is great in my opinion.  Let me know what you think.

Great question.  The answer, unfortunately, is in general unknowable.  You can make a defensible guess at ~50% of your choices, and a speculative guess at the other ~50%. 

E.g., see the 2x2 table below.  It seems reasonable to avoid high fee funds with bad historical returns, much as it seems reasonable to use low fee funds with good historical returns.

The choice is more difficult when looking at the high fee with good return and low fee with low return funds.  You could go to Morningstar and compare your four funds plus the other two Vanguard funds on a single chart (e.g., this one) over different time periods.

Getting rid of JDVFX in favor of VFIAX seems justifiable.  Beyond that...?

                  Bad       Good
                  history   history
High fee        No       Maybe
Low fee       Maybe   Yes

[letired]

Disclaimer: I haven't looked up any of these, I'm going purely off of fund names and posted expense ratios.

It looks like you are currently investing in two mid-cap funds: RPMGX   MID-CAP GROWTH FUND - 0.77% and VIMAX   VANGUARD MID-CAP IND- ADMIRAL  - 0.09% 

Is this on purpose? Unless there is a difference between the two (it's too late/I'm too lazy to dig into the details), it seems like it would make sense (all else being equal) to pick just one mid-cap fund. If you are 25% in each of those, that ... seems like a heavy weight in mid-cap stocks? I'm no seasoned investor who is up on my asset allocation, but that is the main thing to jump out at me. Depending on your preferred asset allocation, it might make sense to switch from the more expensive one to the Vanguard S&P500 Index?

Unless some of the other fund choices have some history of amazing returns, I'd dump it all in some mix of the Vanguard funds and call it a day, given that their expenses are so much lower than all the other options.

[seattlecyclone]

I would probably go with about 80/10/10 allocation between VFIAX/VIMAX/VSMAX. This mix should be pretty close to approximating VTSAX, the total US stock market. Pick up other parts of your asset allocation (bonds, international, etc.) in other accounts because your 401(k) options for those are pretty expensive.

[MustacheAndaHalf]

I'd recommend selling all 3 high expense funds and buying Vanguard 500 with that money.  It's a simpler way to do it, and gives you 75% in S&P 500 and 25% in mid-cap.  That's close enough to market weights to not worry about further, and will dramatically lower your expense ratios.

Which fund will do best in the upcoming year?  Nobody knows.  But lower expenses leave more money for your retirement.

[FrenchStache]

Hey guys,

Quick update

I have changed my future elections to be 80% VFIAX/VIMAX 10%/VSMAX10%.  This will greatly help me reduce my average expense ratio. 

I have a question on rebalancing.  Should I go head and re-balance based on my new mix.  When should you reblance?  Are there any cost associated/risks?  I have never re-balanced before.

Thanks!

[seattlecyclone]

There are no tax consequences to rebalancing within a retirement account, and often no trading fees for 401(k) accounts either. Rebalance when your allocation gets too far out of whack, where the definition of "too far" depends mostly on your tolerance for disorder in your life. ;-)