Author Topic: Recommendation for 401k contribution funds  (Read 1692 times)

BalanceLife

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Recommendation for 401k contribution funds
« on: November 17, 2016, 02:27:11 PM »
We have following Vanguard funds available for 401k:

Vanguard Treasury Money Market Investor   VUSXX
Vanguard Total Bond Market Index Adm           VBTLX
Vanguard 500 Index Admiral                      VFIAX
Vanguard Capital Opportunity Adm                   VHCAX
Vanguard Mid Cap Index Adm                      VIMAX
Vanguard Small Cap Index Adm              VSMAX
Vanguard Explorer Adm                         VEXRX
Vanguard Developed Markets Idx Admiral   VTMGX
Vanguard Emerging Mkts Stock Idx Adm           VEMAX

Currently I have 50% each in VFIAX and VHCAX. I know VFIAX is probably the best option but I don't remember why I have chose VHCAX.
I am 37 years old and want to be aggressive in investing and ready to take the risk.

Is current allocation good?
Is it okay if I go 100% VFIAX?
Any recommendation in adjusting the distribution of funds?
Any better option than VHCAX because I see it has expense ratio of 0.38%?

« Last Edit: November 17, 2016, 03:59:00 PM by BalanceLife »

robartsd

  • Magnum Stache
  • ******
  • Posts: 2993
  • Location: Sacramento, CA
Re: Recommendation for 401k contribution funds
« Reply #1 on: November 17, 2016, 03:00:17 PM »
100% VFIAX should be OK. VHCAX is an actively managed mid-cap growth fund, so it has higher expense ratios (very reasonable when compared to non-Vanguard active funds). If the 500 largest companies is not enough diversity for you, VIMAX and VSMAX can give you mid- and small-cap exposure at at much lower expense ratios.

NP

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Recommendation for 401k contribution funds
« Reply #2 on: November 17, 2016, 04:13:39 PM »
First of all, you should add a healthy dose of international exposure, both developed and emerging markets, instead of only betting on the US. Nobody can possibly know which parts of the world will perform best in the future. VTMGX and VEMAX are excellent funds for this purpose.

Less importantly, since VTSAX (US total market index) is not available to you, I would split the US allocation between VFIAX, VIMAX and VSMAX to approximate the total market so you aren't exposed to large-cap equities only. (Many would even recommend overweighting small-cap equities but there's no consensus on this.)

There's nothing very wrong with VHCAX but as it's been pointed out, it's an actively managed fund with a higher expense ratio than the index funds recommended. Actively managed funds tend to underperform cheap indexes so I would get rid of it.

Finally, when you decide you need bonds, VBTLX will be a fine choice.



Assuming you don't want any bonds, you could use this allocation, for example:
35%
VFIAX500 Index
5%
VIMAXMid Cap Index
10%
VSMAXSmall Cap Index
40%
VTMGXDeveloped Markets Index
10%
VEMAXEmerging Markets Index
(Personally I'd be more aggressive with emerging markets but not everyone would be comfortable with that.)
« Last Edit: November 18, 2016, 05:13:50 PM by NP »