YA401KT

[Zugzwang152]

So I'm just signing up for my company's 401K, which is managed through Vanguard. According to the investor questionnaire that I ran through, it recommends the following mix:

15% Retirement Savings Trust
15% Total Bond Market Index Fund
40% 500 Index Fund
10% Mid-Cap Index Fund
5% Small-Cap Index Fund
15% Total International Stock Index Fund

I want to be slightly more aggressive than that, so I'm thinking of:

10% Retirement Savings Trust
10% Total Bond Market Index Fund
35% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
15% Total International Stock Index Fund

Situation: age 23, single. With my employer match, I'll be contributing about $3650 for this first year, hopefully scaling up with my income later on.

Please comment and make suggestions.

 

[slatr]

Does your Vanguard 401k have Columbia Real Estate Equity?

If so, consider 10-20% of it.

 

[Zugzwang152]

Originally posted by: slatr
Does your Vanguard 401k have Columbia Real Estate Equity?

If so, consider 10-20% of it.

What's your reasoning in recommended this? I don't have that particular option though.

 

[BarneyFife]

Try to invest as much as possible. How much is your employer match?

 

[Vette73]

IMO you are to young for bonds. Go more International and small cap. A little more risk but better to try now. Wait until you are 70 to waste on bonds.

 

[Zugzwang152]

Originally posted by: Marlin1975
IMO you are to young for bonds. Go more International and small cap. A little more risk but better to try now. Wait until you are 70 to waste on bonds.

Hehe, yeah, I rated only a few points below the highest on that questionnaire, which was 100% stock funds.

 

[Zugzwang152]

Originally posted by: BarneyFife
Try to invest as much as possible. How much is your employer match?

Dollar for dollar match to the minimum contribution which is 4% for me.

 

[slatr]

The 15-30+ % rate of return.

I am sorry it is not an option for you.

What's your reasoning in recommended this? I don't have that particular option though.

 

[DaveSimmons]

10% Retirement Savings Trust
10% Total Bond Market Index Fund
35% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
15% Total International Stock Index Fund

You're young, so I'd be even more aggressive in your shoes, either:

(a) a bit more
10% Total Bond Market Index Fund
40% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
20% Total International Stock Index Fund

(b) bonds are for old folks
40% 500 Index Fund
20% Mid-Cap Index Fund
20% Small-Cap Index Fund
20% Total International Stock Index Fund

 

[dullard]

Could you do us a favor and list the symbols for those funds. If you do that leg work, I'll post my comments. Yes, I'm lazy.

 

[Feldenak]

I'm no financial expert (enlisted my little brother's aid figuring my mix out), but I'll throw mine out for you in case it helps (managed through Principal).

Bond and Mortgage Sep Acct: 5.03%
Large Cap Stock Index Sep Acct: 25.18%
Mid-Cap Stock Index Sep Acct: 14.90%
Small-Cap Stock Index Sep Acct: 29.64%
Diversified International Separate Account: 25.23%

 

[Zugzwang152]

Originally posted by: dullard
Could you do us a favor and list the symbols for those funds. If you do that leg work, I'll post my comments. Yes, I'm lazy.

10% Retirement Savings Trust - hmm, none listed?
10% Total Bond Market Index Fund - VBMFX
35% 500 Index Fund - VFINX
15% Mid-Cap Index Fund - VIMSX
15% Small-Cap Index Fund - NAESX
15% Total International Stock Index Fund - VGTSX

 

[Zugzwang152]

Originally posted by: dullard
Could you do us a favor and list the symbols for those funds. If you do that leg work, I'll post my comments. Yes, I'm lazy.

Other options include:

Federal Money Market Fund - VMFXX
Wellington Fund - VWELX
Total Stock Market Index Fund - VTSMX
US Value Fund - VUVLX
PRIMECAP - VPMCX

 

[JS80]

just put everything into Mid-Cap and Small-Cap. Ignore everything else.

 

[Zugzwang152]

Originally posted by: JS80
just put everything into Mid-Cap and Small-Cap. Ignore everything else.

what's your reasoning behind this advice? Thanks.

 

[dullard]

Originally posted by: Zugzwang152
10% Retirement Savings Trust - hmm, none listed?
10% Total Bond Market Index Fund - VBMFX
35% 500 Index Fund - VFINX
15% Mid-Cap Index Fund - VIMSX
15% Small-Cap Index Fund - NAESX
15% Total International Stock Index Fund - VGTSX

Thanks. It looks like that Retirement Savings Trust is basically a money market account returning ~4.3%. Money market accounts can have a very valuable part of your retirement, but be careful with it. In its lifetime, it returned 6%, not very much at all. This should be a short-term play only. And you could argue that since retirement is long-term, you shouldn't do short-term plays.

The cash play (money market) is good right now because I think the US stocks are going to be flat for a couple of years. Yes, you'll get some return, but not a lot. Thus, guaranteed ~4.3% return is better than a likely ~0% return. But, in the long run, I wouldn't want a money market fund like that.

A little bit of bonds is ok. At that little bit of bonds, you won't really harm your return, and you'll really minimize your volitility (risk). So keep it in my opinion. Plus, if the US stocks do stay flat for a bit, you'll be really happy with those bonds.

Personally, I'd say it is a bit out of whack. I plugged the rest into Morningstar.com's X-Ray overview.

You are 72% US and 16% foreign. Typically you want that in a 2:1 ratio. So you are lacking foreign stocks. Bump up VGTSX. This is especially true right now, foreign stocks are in the middle of a big run up, and US stocks may be in a holding pattern. Of course, you can never predict the future. That is why you use a 2:1 ratio. You have a bit of everything then in a reasonable distribution to have good gains and minimized risk.

Also, you have 58% of your stocks in large companies, 32% in medium, and 11% in small. It is ok for the small stocks to be underweght (~2:1 ratio), but your large and medium mix should be about the same. You need to have less large stock and more of the medium and small stocks. I would drop VFINX down a bit (mostly large and some medium) and bump up NAESX (a bit more small than medium).

 

[Zugzwang152]

Originally posted by: dullard

Originally posted by: Zugzwang152
10% Retirement Savings Trust - hmm, none listed?
10% Total Bond Market Index Fund - VBMFX
35% 500 Index Fund - VFINX
15% Mid-Cap Index Fund - VIMSX
15% Small-Cap Index Fund - NAESX
15% Total International Stock Index Fund - VGTSX

Thanks. It looks like that Retirement Savings Trust is basically a money market account returning ~4.3%. Money market accounts can have a very valuable part of your retirement, but be careful with it. In its lifetime, it returned 6%, not very much at all. This should be a short-term play only. And you could argue that since retirement is long-term, you shouldn't do short-term plays.

The cash play (money market) is good right now because I think the US stocks are going to be flat for a couple of years. Yes, you'll get some return, but not a lot. Thus, guaranteed ~4.3% return is better than a likely ~0% return. But, in the long run, I wouldn't want a money market fund like that.

A little bit of bonds is ok. At that little bit of bonds, you won't really harm your return, and you'll really minimize your volitility (risk). So keep it in my opinion. Plus, if the US stocks do stay flat for a bit, you'll be really happy with those bonds.

Personally, I'd say it is a bit out of whack. I plugged the rest into Morningstar.com's X-Ray overview.

You are 72% US and 16% foreign. Typically you want that in a 2:1 ratio. So you are lacking foreign stocks. Bump up VGTSX. This is especially true right now, foreign stocks are in the middle of a big run up, and US stocks may be in a holding pattern. Of course, you can never predict the future. That is why you use a 2:1 ratio. You have a bit of everything then in a reasonable distribution to have good gains and minimized risk.

Also, you have 58% of your stocks in large companies, 32% in medium, and 11% in small. It is ok for the small stocks to be underweght (~2:1 ratio), but your large and medium mix should be about the same. You need to have less large stock and more of the medium and small stocks. I would drop VFINX down a bit (mostly large and some medium) and bump up NAESX (a bit more small than medium).

This seems like really informed advice, thanks. Even the highly aggressive mixes on this recommendation sheet are very heavy on the 500 Index Fund, probably to minimize risk? I don't think I'm going to completely drop the two safest funds, 10% each seems like a good number overall. I'll definitely consider moving more of the 500 Index Fund to small cap and international.

 

[JEDI]

Originally posted by: DaveSimmons

10% Retirement Savings Trust
10% Total Bond Market Index Fund
35% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
15% Total International Stock Index Fund

You're young, so I'd be even more aggressive in your shoes, either:

(a) a bit more
10% Total Bond Market Index Fund
40% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
20% Total International Stock Index Fund

(b) bonds are for old folks
40% 500 Index Fund
20% Mid-Cap Index Fund
20% Small-Cap Index Fund
20% Total International Stock Index Fund

For a 23yr old, i like (b) better

 

[Vette73]

Originally posted by: JEDI

Originally posted by: DaveSimmons

10% Retirement Savings Trust
10% Total Bond Market Index Fund
35% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
15% Total International Stock Index Fund

You're young, so I'd be even more aggressive in your shoes, either:

(a) a bit more
10% Total Bond Market Index Fund
40% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
20% Total International Stock Index Fund

(b) bonds are for old folks
40% 500 Index Fund
20% Mid-Cap Index Fund
20% Small-Cap Index Fund
20% Total International Stock Index Fund

For a 23yr old, i like (b) better

Yep, same here. B looks good for your age and what little you have going in.

Are you maxing what the company will match?

 

[JEDI]

Originally posted by: Zugzwang152

Originally posted by: dullard
Could you do us a favor and list the symbols for those funds. If you do that leg work, I'll post my comments. Yes, I'm lazy.

Other options include:

Federal Money Market Fund - VMFXX
Wellington Fund - VWELX
Total Stock Market Index Fund - VTSMX
US Value Fund - VUVLX
PRIMECAP - VPMCX

GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!v
GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
v
v
vvGET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

GET PRIMECAP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

[slatr]

Why Primecap?

 

[LS20]

more international holla

 

[Zugzwang152]

Originally posted by: Marlin1975

Originally posted by: JEDI

Originally posted by: DaveSimmons

10% Retirement Savings Trust
10% Total Bond Market Index Fund
35% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
15% Total International Stock Index Fund

You're young, so I'd be even more aggressive in your shoes, either:

(a) a bit more
10% Total Bond Market Index Fund
40% 500 Index Fund
15% Mid-Cap Index Fund
15% Small-Cap Index Fund
20% Total International Stock Index Fund

(b) bonds are for old folks
40% 500 Index Fund
20% Mid-Cap Index Fund
20% Small-Cap Index Fund
20% Total International Stock Index Fund

For a 23yr old, i like (b) better

Yep, same here. B looks good for your age and what little you have going in.

Are you maxing what the company will match?

Yeah, I'm putting in the maximum that the company matches, but no more right now. I'm a little leery have no "guaranteed" returns, but I'll have to look more closely at the 500 Index Fund and see whether it's stable enough for me to comfortable with that.

 

[dullard]

Originally posted by: Zugzwang152
This seems like really informed advice, thanks. Even the highly aggressive mixes on this recommendation sheet are very heavy on the 500 Index Fund, probably to minimize risk? I don't think I'm going to completely drop the two safest funds, 10% each seems like a good number overall. I'll definitely consider moving more of the 500 Index Fund to small cap and international.

If I were to choose from those 6 funds only, I'd do this:

5% Retirement Savings Trust
10% Total Bond Market Index Fund - VBMFX
10% 500 Index Fund - VFINX
20% Mid-Cap Index Fund - VIMSX
30% Small-Cap Index Fund - NAESX
25% Total International Stock Index Fund - VGTSX

That way, you have a decent ratio of US:foreign (2.44:1 close to the ideal 2:1 ratio). And you have a good ratio of Large:Med:Small (1.73:1.86:1 close to the ideal 2:2:1 ratio). Also, it is slightly more aggressive with less of the cash fund. The one critical thing these mixes are missing is international small stocks. These have been doing quite well (30%+ returns) recently and show no sign of stopping. If you can find an international small stock fund, I'd use a little less NAESX than I listed above and use that money to buy the international small stock fund.

I didn't look into the other options you listed. But none of them have international small stocks that are missing from your portfolio. Consider one day adding them outside of your 401k.

Morningstar's website, it can be used to get the large vs small and US vs foreign data or even a whole snapshot of your portfolio. It is a very useful tool to see if something is lacking.

 

[Zugzwang152]

Thanks for the link. You're right, all of the other options I mentioned are US-based, and most are heavily bond-based. I've never heard of Morningstar. They are a respectable site for finance and investing information, I assume?