Author Topic: What fund should I invest my 401k in?  (Read 2716 times)

ECOCAV87

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What fund should I invest my 401k in?
« on: October 05, 2015, 01:15:45 PM »
Hello all first time poster , but have been reading for over a year now and lurking. I'm finally getting my bills paid down and have been putting into my companies 401k since January as they match 5 percent. They just started the 401k in January of this year. They have a few vanguard funds and I'm going to list them out, but I'm still new to investing and not entirely sure how these correlate to the vanguard etfs most people say to invest in.

Vanguard Dev Mkts Index Adm
Vanguard Sm Cap Val Idx Adm
Vanguard Md Cap Index Adm
Vanguard 500 Index Adm
Vanguard equity Income Adm

Sorry if the formatting is weird and hard to understand, but that is what it says in my portfolio when I look at it. Thanks in advance I greatly appreciate it.

MDM

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Re: What fund should I invest my 401k in?
« Reply #1 on: October 05, 2015, 01:49:54 PM »
...not entirely sure how these correlate to the vanguard etfs most people say to invest in.
First, don't worry about the difference between ETFs and mutual funds - there isn't enough difference to matter for someone just starting.

If you highlight any of the funds listed in the OP, right click and choose the "Search google for..." option (or similar in whatever browser you use), you should get links to that fund.  E.g., doing that for Vanguard 500 Index Adm brings up this link: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT.  If you want to see the corresponding ETF, click on the "an ETF" link in "Also available as Investor Shares mutual fund and an ETF" on that page.

As for the title question, you have many good options.  25% in each of the first four is one defensible choice, but there are many others as well.

You might try http://www.bogleheads.org/wiki/Category:Getting_started and
http://jlcollinsnh.com/stock-series/ for more background.

Indexer

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Re: What fund should I invest my 401k in?
« Reply #2 on: October 05, 2015, 02:12:45 PM »
I personally like my stocks 60% domestic, 40% international with market weightings in each. Using these funds that would come out to about....


39% 500 index
16% mid cap
5% small cap
40% developed.

The above is lacking any emerging markets, but those weren't an option. On the US side the 500 + mid cap + small cap in these allocations is pretty close to copying the US market.  Being 30-40% international on the stock side gives you enough diversification to lower volatility some without going to far international which actually raises volatility.

Now that is good for the stock side of things. If you have a long time horizon and a very high risk tolerance being 100% stocks is fine. Otherwise, what are the bond funds?

DaveR

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Re: What fund should I invest my 401k in?
« Reply #3 on: October 05, 2015, 02:40:16 PM »
It's nice that you have some good Vanguard equity options to choose from. Hopefully there are some bond fund options too.

MDM pointed to a couple of great links. You might also look at Bill Bernstein's If You Can (free 16pg quick-read booklet): http://efficientfrontier.com/ef/0adhoc/2books.htm

ECOCAV87

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Re: What fund should I invest my 401k in?
« Reply #4 on: October 05, 2015, 05:03:07 PM »
Unfortunately those are the only vangaurd options. There are other options from different companies. The 401k advisor that came to talk with us told everyone to just use the T. Rowe Price target retirement date fund. So far I'm not too happy with that suggestion its also 100 percent stocks and I don't want to wait till 2055 to retire. I'm 28 and hopefully looking to retire at or around age 40. Thanks for all the advice I'll check on the bonds and get back to everyone with a response.

MDM

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Re: What fund should I invest my 401k in?
« Reply #5 on: October 05, 2015, 05:13:51 PM »
The 401k advisor that came to talk with us told everyone to just use the T. Rowe Price target retirement date fund. So far I'm not too happy with that suggestion its also 100 percent stocks and I don't want to wait till 2055 to retire.

That advice, depending on the fund fee, may be good.

See https://www.bogleheads.org/wiki/Target_date_retirement_funds and https://www.bogleheads.org/forum/viewtopic.php?f=10&t=134191.

From the first link, the "...recommendation is to ignore the fund's date. Instead, determine the amount of risk the investor is willing to tolerate and work backwards to find a fund that matches the chosen stock/bond allocation."

ECOCAV87

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Re: What fund should I invest my 401k in?
« Reply #6 on: October 05, 2015, 05:19:16 PM »
Here are the only two bond funds that are available to me
American century gov bond inv
Metropolitan west TotRe bd 1

ECOCAV87

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Re: What fund should I invest my 401k in?
« Reply #7 on: October 05, 2015, 05:30:17 PM »
Looking at the fees, theT Rowe Price fund fee is .76 percent while the vanguard 500 is .05 and the other three vamgairds are .09 percent. I am young and don't mind a high risk after all I'm in it for the long haul right? I think I'll switch over to the vanguard funds. Thanks for everyone's help and I look forward to learning more and enjoying the early retirement life

MDM

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Re: What fund should I invest my 401k in?
« Reply #8 on: October 05, 2015, 05:42:09 PM »
Looking at the fees....
Always a good thing to do.  Even if you've learned nothing else from this thread (and that's probably a pessimistic view), that's a great takeaway.

DaveR

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Re: What fund should I invest my 401k in?
« Reply #9 on: October 05, 2015, 05:49:03 PM »
Looking at the fees, theT Rowe Price fund fee is .76 percent while the vanguard 500 is .05 and the other three vamgairds are .09 percent. I am young and don't mind a high risk after all I'm in it for the long haul right? I think I'll switch over to the vanguard funds. Thanks for everyone's help and I look forward to learning more and enjoying the early retirement life

The long-term mentality is the right one, for sure.
Don't forget, you have $5,500 per year that you can put into an IRA (traditional or Roth) independent of the 401(k). You can easily hold your bond funds there in order to diversify your asset classes.