How is your IRA/401K retirement allocated?

[zanemoseley]

I'm 31 and have around 50k in my IRA at work, a little less than 1 year's salary for me. I'm switching up my funds as last year they did pretty piss poor in comparison to the S&P not to mention the bloated expense ratios Merrill Lynch gets. I'm looking at getting back into more index funds to reduce my expenses and hopefully increase return. I'm curious how you guys (especially those in my age bracket) have your funds allocated. I don't overly trust the advise they give me at ML as its influenced by what pays them well.

I'm looking at the following portfolio for both my 50k and future purchases.

60% Vanguard VOO (S&P 500 Index) .05% expense ratio
25% Vanguard VEXAS (mid/small cap blend) .10% expense ratio
15% International (may let them pick this fund, I currently have some money in VESGX which did poorly last year but decent before that)

They charge another 1% for a managed account which covers transactions so another $500 a year. Optionally I can just do purchases for about $82 each including the SEC fee in lieu of the 1% fee. This will make sense when I get more more invested but for now the 1% will be fine.

 

[NikolaeVarius]

Vanguard Index fun. 80% Stocks, 20% Bonds. Lowest Expense ratio I could find.

It's doing pretty well.

 

[zanemoseley]

So which index fund? S&P 500?

 

[brianmanahan]

US total market (VTI) - %35
US small value (VBR) - %10
US REITs (VNQ) - %5
international total market (VXUS) - %17.5
international small (VSS) - %5
international REITs (VNQI) - %2.5
US total bond market - %25

 

[brianmanahan]

also, you shouldn't need to pay those fees in an IRA at all. transfer that stuff to vanguard or fidelity or schwab to get low-expense funds/ETFs that are free of transaction fees

 

[zanemoseley]

It's a simple ira through my work, not sure I can transfer out of it. Anyone know for sure?

 

[kranky]

Why get out of international? If you bought it to be diversified, it still fulfills that role. Many younger investors feel the need to jump in and out of investments. A sobering statistic is that the average investor's profits are much less than the market. Why? They jump in and out, and at the wrong times.

From the Dalbar report in 2014:

So over the 30 years from QAIB’s inception to the 2013 market close — a period encompassing the crash of 1987 and subsequent market booms and busts — equity fund investors earned an average annual return of 3.69% compared with the S&P 500’s 11.11% return.

Develop an asset allocation plan, choose low-cost funds, periodically rebalance to maintain your allocation, and ignore the noise.

 

[Genx87]

I diversify more than that. I'm in 3 investment houses. 3 ETFs, 1 Stock(Exxon), 14 funds that span different stock, bond, sector, domestic, and international markets.

My breakdown looks like this right now.

International - Stock 29.59%
Domestic - Stock 48.68%
Bond 11.84%
Sector 9.90%
100.00%

 

[MongGrel]

I probably ought to move one thing, but it's just been doing so well.

 

[Genx87]

Why get out of international? If you bought it to be diversified, it still fulfills that role. Many younger investors feel the need to jump in and out of investments. A sobering statistic is that the average investor's profits are much less than the market. Why? They jump in and out, and at the wrong times.

From the Dalbar report in 2014:


Develop an asset allocation plan, choose low-cost funds, periodically rebalance to maintain your allocation, and ignore the noise.

+1

Also people who jump in and out get killed with fees a lot of times. They look at it as 10 bucks here, 50 bucks there. But as a % often times it destroys appreciation.

 

[pete6032]

100% stock, 65/35 domestic/international split. Vanguard Total Stock Market and Vanguard Total International Stock Market. I rebalance once per year.

 

[dr150]

100% stock, 65/35 domestic/international split. Vanguard Total Stock Market and Vanguard Total International Stock Market. I rebalance once per year.

I like how you think. Simple and effective.

I eschew bonds as well. I focus on beating the S&P500. It's pretty damn easy to beat SPY if you reassess every year, but if you don't play the "index board game", then VTI or a "life fund" is the saner move for the "non-gamer".

I play the game b/c returns are much headier with certain flavors. Indexes are like movie stars. It's pretty easy to find the "hot actress" (i.e. segment) of the year and kick the S&P500's returns in the ass. Over a 5-10 year period of "gaming" your returns should please you relative to the S&P500.

For Int'l I'm currently using the sexy HEDJ. It's attractiveness is b/c it works with the currency fluctuations which is the reason why it has become extremely popular with Wall Streeters. It's one of the most popular, if not most popular (billions in the past few months) ETF product of 2015.

Another great one is HACK due to the booming security industry (or add PANW as the safest stock in this group).

Biotech also continues to be huge (XBI, IBB, and the safer PJP). Semiconductors is also very hot for this year.

Growth ETFs will be the way to play 2015.

The broad QQQ will continue to easily beat the S&P500 if you stay long.

 

[Printer Bandit]

100% cash, cause i'm afraid the stock market will crash in the next couple years.

 

[Gunslinger08]

It's a simple ira through my work, not sure I can transfer out of it. Anyone know for sure?

http://en.wikipedia.org/wiki/SIMPLE_IRA

Unlike a 401(k), a SIMPLE IRA cannot be rolled over to a Traditional IRA without a waiting period (two years from the date the employee first participated in the plan).

 

[brianmanahan]

It's a simple ira through my work, not sure I can transfer out of it. Anyone know for sure?

ah nope, if you are still working there then i dont think you can

just have to make the best of it

OR

open your own traditional IRA or roth IRA at any brokerage of your choosing

 

[Engineer]

ah nope, if you are still working there then i dont think you can

just have to make the best of it

OR

open your own traditional IRA or roth IRA at any brokerage of your choosing

and in some cases, it's far cheaper on the fees side to open your own IRA because the fees of some of the simple IRA's can be stupidly high (my company's fees are outrageous - 3.5% up front - and there's nothing I can do other than to get the match and then fill up other retirement accounts first).

Tried to talk the owner into a 401k plan but he says they are too expensive so basically, the employees, including him, get high fees to pay the bill of the SIMPLE IRA.

I really don't know what my overall allocation is. I know in all of my accounts that I'm close to 20% cash (2 and 3% CD's mostly) with the majority of the rest in S&P 500 index funds, growth funds and some international. A little in bond funds (maybe 5% or so). I'm older than the OP (46) so not sure that my situation helps.

Never wavered during the ups and downs, even watching the 64% drop from 2008-2010 in my account (became a 201K plan). Hope to have quite a few up years over the next decade and might retire early and just piddle at work after that, if I'm lucky.

 

[Genx87]

3.5% management fee? How does anybody make any money in your IRA?

 

[dr150]

100% cash, cause i'm afraid the stock market will crash in the next couple years.

That fear mongering does you no good.

You're losing to inflation (i.e. you're losing money on a 1% CD).

Even if you armageddon another crash comparable to 2000 or 2008 due to rather unique circumstances, the recovery (and then some) was still there. This is even truer if you stayed stateside with your investments.

Of course, if you're in your 60's you obviously need to play conservative...but not during your working life.

 

[Engineer]

3.5% management fee? How does anybody make any money in your IRA?

From the match (seriously). 100% match over the first 3% contributions. So I put in 3%, company puts in 3% and the IRA company takes 3.5% of that (6% * .035) = 0.21% of my income in fees. SUCKS! :barf:

With that said, the market has beat the pants off of the 3.5% since I've been in it but that's just luck of the draw (I've only been in it for 3 years).

You're losing to inflation (i.e. you're losing money on a 1% CD).

Most of my cash is in 3% CD's. I might be close to losing but not losing currently at 3%.

 

[Engineer]

D/P

 

[dr150]

From the match (seriously). 100% match over the first 3% contributions. So I put in 3%, company puts in 3% and the IRA company takes 3.5% of that (6% * .035) = 0.21% of my income in fees. SUCKS! :barf:



Most of my cash is in 3% CD's. I might be close to losing but not losing currently at 3%.

Find out if your plan allows you to invest in funds outside of the chosen funds they offer. It could save you from those fees. At Fidelity, for example, this service is known as Brokeragelink.

I'd email your compensation executive to look into using other fund managers to save on fees.

I know that the two companies my wife has worked for in the past decade, her companies have changed managers to save on fees due to employees aggressively voicing their dissatisfaction to admin.

 

[zanemoseley]

3.5% of contributions only isn't bad, 3.5% of total investments per year is ridiculous and a totally different story.

 

[Engineer]

Find out if your plan allows you to invest in funds outside of the chosen funds they offer. It could save you from those fees.

I'd email your compensation executive to look into using other fund managers to save on fees.

I know that the two companies my wife has worked for in the past decade, the companies have changed managers to save on fees due to employees voicing their dissatisfaction to admin.

1: It does not. Fund choices are VERY limited and not easily changed (must fill out paperwork and talk to adviser). It's about 3 layers deep of people from different companies running this stupid thing.

2: There are 8 people in the company - and one of those just went to part time. Owner will not pay the extra money to get a 401k or other plan because it's too expensive so in essence, we are paying for it as contributors instead of the company paying for the plan.

3: Other employees don't give a crap about it. I'm the only one who even looks at this stuff, that's why I get the match, max out my and my wife's IRA's and then put more money in depending on tax situation.

 

[Engineer]

3.5% of contributions only isn't bad, 3.5% of total investments per year is ridiculous and a totally different story.

It's 3.5% of contributions and then a yearly fee that is less than 1% (some are fixed dollar amounts depending on the fund). If it were 3.5%, I would just put the money into my brokerage account as the 3.5% of OVERALL would be more than the match.

I've been following the market for about 20 years and just seems that you can't beat the S&P500 Index Funds unless you just know what you're doing or get extremely lucky. I've found that I'm not lucky so the S&P 500 has been very good to me, especially over the last 4 to 5 years.

OT (sort of) but AT really needs a FINANCE forum!!!

 

[Dr. Zaus]

100% cash, cause i'm afraid the stock market will crash in the next couple years.

You can get 11k a year in I-Bonds. They can be cashed out any time and adjust based on inflation. Better than Gold as a hedge against inflation.