Author Topic: Newbie here, looking for feedback on my 401k  (Read 3924 times)

opmal7

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Newbie here, looking for feedback on my 401k
« on: April 20, 2015, 09:31:56 AM »
Hi all.  I don't know much about the world of investing.  I can wrap my head around investing in a business or real estate, but for whatever reason investing in stocks/bonds/mutual funds just doesn't make any intuitive sense to me.  I have a 401k through my employer, and I just chose the 'aggressive' option since I'm young (29), and that's the basic advice I was given.  I do have the option to distribute my 401k funds into whatever stocks/funds I want (could put 100% in Google if I really wanted to), but since I don't know much about this stuff I've just let it be.  My savings isn't my #1 priority at this moment.  I have about $35k in student loans that I'm working to pay off, hopefully, in the next 2-3 years.  Once those are paid off, I plan on putting that extra money towards savings.  I'm just interested in some feedback about my 401k funds from some of you more seasoned/knowledgeable investors.  I don't know if I'm ready to make any changes yet, but I'd like to start educating myself on these topics.  So if you could, please provide feedback on my investment profile, and if you have any recommended reading, I would be happy to hear what you have to share.  Thanks!

Here are my 401k funds.  I don't know how to do a table in these forums, so I just used a picture.  Any advice/feedback is welcomed!



skunkfunk

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Re: Newbie here, looking for feedback on my 401k
« Reply #1 on: April 20, 2015, 10:05:51 AM »
I'm no investing expert so I'll refrain from telling you where to put the money, but some of those expense ratios are outrageous. I suggest going with lower expense funds.

opmal7

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Re: Newbie here, looking for feedback on my 401k
« Reply #2 on: April 20, 2015, 10:25:13 AM »
I'm no investing expert so I'll refrain from telling you where to put the money, but some of those expense ratios are outrageous. I suggest going with lower expense funds.

That's what I was thinking, maybe putting everything into the low fee Vanguard's for the next few years until my student loans are paid off and I start getting serious.

Scandium

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Re: Newbie here, looking for feedback on my 401k
« Reply #3 on: April 20, 2015, 10:36:59 AM »
That is a random selection of Vanguard funds.. The other expenses are horrible so I just looked at the three vanguard ones.
http://portfolios.morningstar.com/fund/summary?t=VVIAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VIGAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VEIRX%20&region=usa&culture=en_US

You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

After paying off loans use your IRA/Roth or taxable account to buy buy total international (VTIAX) and extended market (VEXAX). You'll have to figure out the percentages you want in each. To get total market you'd want ~20% of your US stocks in VEXAX and 80% in your 401k funds.
« Last Edit: April 20, 2015, 11:05:02 AM by Scandium »

velocistar237

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Re: Newbie here, looking for feedback on my 401k
« Reply #4 on: April 20, 2015, 11:03:17 AM »
Agree about the high expenses. Also, there's no reason to have so many funds, especially while your portfolio is small.

Have some light reading.

http://jlcollinsnh.com/stock-series/
http://www.bogleheads.org/wiki/Getting_started

RangerOne

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Re: Newbie here, looking for feedback on my 401k
« Reply #5 on: April 20, 2015, 11:24:44 AM »
I am worried one day I will work for someone with crappy selections like this as well.

Could he not try to invest only in a few of the vanguard funds and then maybe open a Roth-IRA and invest only in the missing pieces like international there to better diversify?

That to me seems like the most logical option since 1% fees are a waste of money, and a company 401k is the only way to access that nice 18k per year pre-tax contribution.

skyrefuge

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Re: Newbie here, looking for feedback on my 401k
« Reply #6 on: April 20, 2015, 11:48:04 AM »
You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

I interpreted the list of funds not as the list of available funds in the OPs 401(k), but rather, the list of funds that the OP is actively invested in.

So there may very well be total-market funds like VTSAX available to choose from, at low expense ratios. ("I do have the option to distribute my 401k funds into whatever stocks/funds I want (could put 100% in Google if I really wanted to)")

It sounds like the OP ended up in this overly-complex and expensive set of funds by using some sort of automatic-adviser provided by the 401(k), like "here is the optimal set of funds we decided on for an 'aggressive' investor".

If so, just follow velocistar237's advice. Ditch that set of funds and reallocate into a simpler and cheaper set of funds based on what you learn from reading those links.

opmal7

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Re: Newbie here, looking for feedback on my 401k
« Reply #7 on: April 20, 2015, 11:50:07 AM »
That is a random selection of Vanguard funds.. The other expenses are horrible so I just looked at the three vanguard ones.
http://portfolios.morningstar.com/fund/summary?t=VVIAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VIGAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VEIRX%20&region=usa&culture=en_US

You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

After paying off loans use your IRA/Roth or taxable account to buy buy total international (VTIAX) and extended market (VEXAX). You'll have to figure out the percentages you want in each. To get total market you'd want ~20% of your US stocks in VEXAX and 80% in your 401k funds.

Wow, 99% of that was over my head.  I do appreciate your feedback, and maybe it will make more sense to me after I do some more reading.

Scandium

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Re: Newbie here, looking for feedback on my 401k
« Reply #8 on: April 20, 2015, 11:51:47 AM »
You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

I interpreted the list of funds not as the list of available funds in the OPs 401(k), but rather, the list of funds that the OP is actively invested in.

So there may very well be total-market funds like VTSAX available to choose from, at low expense ratios. ("I do have the option to distribute my 401k funds into whatever stocks/funds I want (could put 100% in Google if I really wanted to)")

It sounds like the OP ended up in this overly-complex and expensive set of funds by using some sort of automatic-adviser provided by the 401(k), like "here is the optimal set of funds we decided on for an 'aggressive' investor".

If so, just follow velocistar237's advice. Ditch that set of funds and reallocate into a simpler and cheaper set of funds based on what you learn from reading those links.
Doh. Yeah sounds like you're right. In that case find vanguard total US + total international and done.

opmal7

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Re: Newbie here, looking for feedback on my 401k
« Reply #9 on: April 20, 2015, 12:00:10 PM »
That is a random selection of Vanguard funds.. The other expenses are horrible so I just looked at the three vanguard ones.
http://portfolios.morningstar.com/fund/summary?t=VVIAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VIGAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VEIRX%20&region=usa&culture=en_US

You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

After paying off loans use your IRA/Roth or taxable account to buy buy total international (VTIAX) and extended market (VEXAX). You'll have to figure out the percentages you want in each. To get total market you'd want ~20% of your US stocks in VEXAX and 80% in your 401k funds.

Wow, 99% of that was over my head.  I do appreciate your feedback, and maybe it will make more sense to me after I do some more reading.

Precisely.  These are the funds that I am currently invested in, but I was told we have the option to invest in anything we want.  To simplify things for us, they laid out 4-5 investment profiles (Aggressive, Moderately aggressive, moderate, moderately conservative, conservative), and they basically said young people should invest in "Aggressive" which is 90% stocks/10% bonds, and as you get older and closer to retirement you would switch to more conservative (90% bonds/10% stocks).

Scandium

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Re: Newbie here, looking for feedback on my 401k
« Reply #10 on: April 20, 2015, 01:10:29 PM »
That is a random selection of Vanguard funds.. The other expenses are horrible so I just looked at the three vanguard ones.
http://portfolios.morningstar.com/fund/summary?t=VVIAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VIGAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VEIRX%20&region=usa&culture=en_US

You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

After paying off loans use your IRA/Roth or taxable account to buy buy total international (VTIAX) and extended market (VEXAX). You'll have to figure out the percentages you want in each. To get total market you'd want ~20% of your US stocks in VEXAX and 80% in your 401k funds.

Wow, 99% of that was over my head.  I do appreciate your feedback, and maybe it will make more sense to me after I do some more reading.

Precisely.  These are the funds that I am currently invested in, but I was told we have the option to invest in anything we want.  To simplify things for us, they laid out 4-5 investment profiles (Aggressive, Moderately aggressive, moderate, moderately conservative, conservative), and they basically said young people should invest in "Aggressive" which is 90% stocks/10% bonds, and as you get older and closer to retirement you would switch to more conservative (90% bonds/10% stocks).

That's a great plan then. I would read what other people have posted, especially the bogleheads link.

But definitely get out of all those funds and pick some low cost vanguard ones. A nice three-fund portfolio should be plenty. You can add bonds later so something like 70/30 in total US (VTSAX) and total international (VTIAX) would be my suggestion for now.

Gone Fishing

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Re: Newbie here, looking for feedback on my 401k
« Reply #11 on: April 21, 2015, 10:34:09 AM »
That is a random selection of Vanguard funds.. The other expenses are horrible so I just looked at the three vanguard ones.
http://portfolios.morningstar.com/fund/summary?t=VVIAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VIGAX&region=usa&culture=en_US
http://portfolios.morningstar.com/fund/summary?t=VEIRX%20&region=usa&culture=en_US

You're really missing good international and small cap options. VEIRX looks like another large cap value fund, similar to VVIAX, so a lot of overlap there, but it will give you 10% international at a low fee at least. It does have a dividend strategy which I don't like. And 33% turnover vs <10% for the others. Actually the more I read about it the less I like it.

I'll leave it up to someone else to decide if paying 1%+ in fees is worth it for SC and international. But to keep it simple I'd suggest something like 50% each in VVIAX and VIGAX. Basically a US large cap fund.

After paying off loans use your IRA/Roth or taxable account to buy buy total international (VTIAX) and extended market (VEXAX). You'll have to figure out the percentages you want in each. To get total market you'd want ~20% of your US stocks in VEXAX and 80% in your 401k funds.

Wow, 99% of that was over my head.  I do appreciate your feedback, and maybe it will make more sense to me after I do some more reading.

Certainly not bad advice, but if I were you, I'd start with a low fee target retirement fund such as the Vanguard Target Retirement 2050 fund.  The target funds will make automatic risk adjustment changes for you as you age.  It is pretty much set it and forget it.  If you never do anything else, you will probably do just fine in the end. You can tweak your portfolio accordingly when and if you build your investing knowledge to the point where you think you can do better (might take a few month or years if you are starting at zero).