I'm a little frustrated that my options in my 401k have such high expense ratios compared to the ETFs I have in my Vanguard IRA, but I guess this is a common gripe about 401k's and there's not much I can do about that.
Check out
this article on suggestions to try to improve your 401(k). Do you know if any co-workers share your concerns?
The only fund offered by my employer that is under 1% expense ratio is an S&P500 at 0.83%. Otherwise, most funds in the plan are between 1.25 and 2%
Then what we should be doing is setting up your IRA to account for the poor fund choices in your 401(k). What are the approximate balances?
My suggestion is going to be to put 100% of your 401(k) into this fund, and we'll put bonds, international stocks, and small caps into your IRA (is it Roth or traditional/rollover?) to make up for this.
Do I have too many funds in my 401k?
Probably. More importantly, you probably have too many bad funds.
I wanted to diversify
Diversification in investments is achieved by the underlying investments held, not by how they're held. You probably have a ton of overlap in what stocks the mutual funds you're holding actually own.
, but would it be better to simplify? Am I too conservative? Personal Capital tells me that I have too much large cap stock and not enough small cap, and a little too much in bonds. I'd love to hear people's feedback/advice:
My 401(k) fund assessment says I have too much bonds. It's wrong because it's short-sighted. All of my bonds are in my 401(k) (but my 401(k) is far from being only bonds), because that's the bulk of the good fund choices in it - and, again, I'm using my IRA and taxable to make up for the poor funds there.
First things first, let's decide what you want to hold. If your 401(k) and IRA were one, and you could put the money into whatever types of investments you want, what percentage of it would be in bonds? Of the stocks, what fraction would be domestic (U.S.) and which would not be?
(I'll suggest holding off dabbling in other things for the time being)
This is a more detailed what I have in my 401k account:
-American Century Strategic Allocation Aggressive: Makes up 49.83% of my overall portfolio (including my IRA) with a 1.79% expense ratio. It's a balanced aggressive fund that leads towards large growth stock. It has 57% US stock, 20% non-US stock, and 19% bonds. I allocated a large percentage to it back when I picked it because it said aggressive, and I knew that as a young investor I wanted to be aggressive. With 19% in bonds though, I now feel like that's not too aggressive....
Actually, there isn't much of an advantage to 100% stocks over 80% stocks, especially if you're only using tax-advantaged accounts (or if you are treating tax-advantaged and taxable differently).
-American Century Strategic Allocation Moderate: Makes up roughly 3.5% of my overall portfolio with a 1.66% expense ratio. It's 48% US stock, 15% non-US stock, and 30% bond. I'm thinking of getting rid of this and putting it into a small cap fund. It's too conservative in my opinion...
Wrap funds are best used when they're 100% of your investment, such as by finding one that holds the asset allocation you desire and letting that handle everything for you.
In my IRA, I have:
-a Vanguard S&P 500 Index ETF that makes up roughly 17.4% of my portfolio (0.05% expense ratio)
-a Vanguard Small Cap ETF that makes up 3.4 % of my portfolio (0.10% expense ratio)
-a Vanguard FTSE Emerging Markets ETF that makes up a little over 3% of my portfolio (0.18% expense ratio)
-a Vanguard FTSE All World ex-US Small Cap ETF that makes up almost 4% of my portfolio (0.25% expense ratio)
Okay, you're comfortable with ETFs. That'll help when we figure out what's going on with your total portfolio.
I see that your IRA is 27% of your portfolio, inferring that 73% is in your 401(k) (is this accurate?). Have you maxed out your IRA for 2013?
