YA401KT

[dullard]

Originally posted by: 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?

Yes. Morningstar gets good recommendations from financial forums.

I didn't know if you saw my edit, so I moved it below:

And remember, in the long run, almost ALL funds will do well at times and ALL will do poorly at times. Your main job (and the only possible job to do with confidence) is to avoid the funds that are almost always in the poorly performing category. The rest is up to chance. We can't predict the future, so we can just attempt to maximize your probabilities of doing well. The biggest thing you can do is to once a year ask the same question. Did any of your funds do poorly? If so, buy more of it (if you think it'll bounce back up then there will be huge gains as it recovers) or get out of it completely (if you never think it'll bounce back up). Look up the idea of rebalancing and do it once a year. Properly maintaining it once a year is far more important than what funds you choose now.

A properly maintained mixture of so-so funds will in almost all cases do better than a mixture of funds that were at one time stellar but were since ignored and dilapidated.

Oh, before I forget. You may want to ask about the quality of the bond fund. It appears like it is investing only in very stable companies. Stability = lower returns. You may do better in a bond fund that is a bit more risky. I don't really watch bonds though.

 

[Zugzwang152]

Originally posted by: dullard

Originally posted by: 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?

Yes. Morningstar gets good recommendations from financial forums.

I didn't know if you saw my edit, so I moved it below:

And remember, in the long run, almost ALL funds will do well at times and ALL will do poorly at times. Your main job (and the only possible job to do with confidence) is to avoid the funds that are almost always in the poorly performing category. The rest is up to chance. We can't predict the future, so we can just attempt to maximize your probabilities of doing well. The biggest thing you can do is to once a year ask the same question. Did any of your funds do poorly? If so, buy more of it (if you think it'll bounce back up then there will be huge gains as it recovers) or get out of it completely (if you never think it'll bounce back up). Look up the idea of rebalancing and do it once a year. Properly maintaining it once a year is far more important than what funds you choose now.

A properly maintained mixture of so-so funds will in almost all cases do better than a mixture of funds that were at one time stellar but were since ignored and dilapidated.

Oh, before I forget. You may want to ask about the quality of the bond fund. It appears like it is investing only in very stable companies. Stability = lower returns. You may do better in a bond fund that is a bit more risky. I don't really watch bonds though.

Saw it up there. Thanks. :thumbsup: I'm gonna browse that site and learn more about this investing stuff.

 

[Elbryn]

its a great thing that your company's 401k is through vanguard.
one source if extremely good information is
diehard forum
you'll find a ton of useful information there that ranges from the lazy man 3 fund
total stock market + total international + total bond to the various slice and dice.

Much of it depends on your interest/comfort level. the first goal is to accurately judge your risk level and decide on your asset allocation. then find the funds that fit.

the simplest way to go right now would be to choose the target retirement fund of choice depending on stock/bond percentages and send all your money there. the read some books, the diehards tout the bogglehead book (good by the way, talks about value of compounding, insurance, taxes, not just retirement) and several other choices. once you've had a chance to come to grips with how far you are willing to study, you can make your own choices.

as for where to put tax defferred money here's the general list:
after hitting your 401k employer match, you'll want to fund a roth ira next, then max out your 401k. if you have the option 457b then 403b next. after that, its all into the taxable accounts where you want to keep in stocks to avoid as much capital gain as possible. bonds should always be kept in tax deffered accounts as they give their returns in distributions which would be taxed if it werent in a tax defferred account.

 

[RaiderJ]

Definitely do at least the employer match like you're doing, especially if you can get it fully vested right off the start. That way if you change jobs you get to keep the match.

 

[Zugzwang152]

Originally posted by: RaiderJ
Definitely do at least the employer match like you're doing, especially if you can get it fully vested right off the start. That way if you change jobs you get to keep the match.

vestment is a completely different matter for me. You gain 20% vestment in the company match every year of service, up until 6 years (You have 0% vested in the first year).

 

[shuttleboi]

I'm setting up a vanguard 401k too. I'm around 30. I would like to be aggressive at this point. I've read one should never invest more than 25% in any one fund.

Any comments?

10% Vanguard 500 Index Fund Investor Shares (VFINX)
10% Vanguard Equity Income Fund (VEIPX)
10% Vanguard Life Strategy Growth (VASGX)
10% Vanguard Mid-Cap Growth (VMGRX)
10% Total Bond Market Index Fund (VBMFX)
25% Royce Low-Priced Stock Service (RYLPX)
25% William Blair International Growth (WBIGX)

 

[Jadow]

Age 23 = NO BONDS

I wouldn't have anything in bonds till about age 45-50

 

[Jadow]

Originally posted by: shuttleboi
I'm setting up a vanguard 401k too. I'm around 30. I would like to be aggressive at this point. I've read one should never invest more than 25% in any one fund.

Any comments?

10% Vanguard 500 Index Fund Investor Shares (VFINX)
10% Vanguard Equity Income Fund (VEIPX)
10% Vanguard Life Strategy Growth (VASGX)
10% Vanguard Mid-Cap Growth (VMGRX)
10% Total Bond Market Index Fund (VBMFX)
25% Royce Low-Priced Stock Service (RYLPX)
25% William Blair International Growth (WBIGX)

I think that's too many funds. I like to keep it simple. Also, I would have more in the 500 index. That should be the stallwort of your portfolio, I'd have about 40% in that and the remain 60% in about 3 other funds.

 

[JEDI]

Originally posted by: shuttleboi
I'm setting up a vanguard 401k too. I'm around 30. I would like to be aggressive at this point. I've read one should never invest more than 25% in any one fund.

Any comments?

10% Vanguard 500 Index Fund Investor Shares (VFINX)
10% Vanguard Equity Income Fund (VEIPX)
10% Vanguard Life Strategy Growth (VASGX)
10% Vanguard Mid-Cap Growth (VMGRX)
10% Total Bond Market Index Fund (VBMFX)
25% Royce Low-Priced Stock Service (RYLPX)
25% William Blair International Growth (WBIGX)

yes, u can have more than 25% in a fund.

i have 50% in vtsax (vanguard total market ADMIRAL )
it takes the place to large, mid, and small cap.

 

[alrocky]

Originally posted by: Zugzwang152
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.

Being "a little leery" suggests a 100% stock asset allocation is not right for you. A 80:20 stock:bond ratio nets you about the same return as a 100:0 but with less volatility. Vanguard's 500 has returned an average annual 12.23% since inception 1976. It's average annual return over the last 19 years is also around 12%.

The US stock market comprises about half of the world's trade-able stocks. Recommendations on the amount of foreign range from 20-40% of your equity allocation. The US stock market (VTSMX) is 73:19:9 Large-Cap : Mid-Cap : Small-Cap as shown on the Morningstar X-ray link. Note that Vanguard and T.Rowe Price retirement 2020 - 2050 funds are predominately Large Cap. On the diehard site that Elbryn noted is a link to Books of Interest; W. Bernstein in The Four Pillars of Investing has a suggested asset allocation ratio of 8:4:5 for Large-Cap : Small-Cap : Foreign. Allowing for a bond allocation of 10%, 8:4:5 translates to:

42% - 500 Index Fund - VFINX
21% - Small-Cap Index Fund - NAESX
27% - Total International Stock Index Fund - VGTSX
10% - Total Bond Market Index Fund - VBMFX

I'd prefer 35:25:30:10 L:S:F:B

35% - 500 Index Fund - VFINX
25% - Small-Cap Index Fund - NAESX
30% - Total International Stock Index Fund - VGTSX
10% - Total Bond Market Index Fund - VBMFX

or

35% - 500 Index Fund - VFINX
13% Mid-Cap Index Fund - VIMSX
12% - Small-Cap Index Fund - NAESX
30% - Total International Stock Index Fund - VGTSX
10% - Total Bond Market Index Fund - VBMFX

---

Unless you know what the Retirement Savings Trust is, you shouldn't invest in it. I have Primecap CORE because Primecap is closed to the general public.

 

[Garet Jax]

Originally posted by: 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.

You should be much more aggressive. 401K is long term - as such you have plenty of time to ride out the bumps. Much more aggressive...

 

[BChico]

This thread got me thinking about my contributions...I just started my 401K in July, Im 22. These are my current contributions.

30% - FID Balanced
20% - FID SEL Energy
20% - FID Diversified INTL
20% - FID Europe
10% - FID EMERG MRKTS

I had good performance last year around 12%, I think I need to make it more aggressive though. Anyone have experience with Fidelity funds?

Im thinking this scenario now...

30% - FID Fifty (Large-Cap)
20% - FID Diversified INTL
20% - FID Real Estate INVS
10% - FID SEL Energy
10% - FID Europe
10% - FID EMERG MRKTS

Do I need mid-cap or small-cap in there? Do I have too much in international? What about the outlook for real estate and energy?

 

[alrocky]

Originally posted by: shuttleboi
I'm setting up a vanguard 401k too. I'm around 30. I would like to be aggressive at this point. Any comments?

E.R.
0.18 10% Vanguard 500 Index Fund Investor Shares (VFINX)
0.31 10% Vanguard Equity Income Fund (VEIPX)
0.26 10% Vanguard Life Strategy Growth (VASGX)
0.47 10% Vanguard Mid-Cap Growth (VMGRX)
0.20 10% Total Bond Market Index Fund (VBMFX)
1.49 25% Royce Low-Priced Stock Service (RYLPX)
1.42 25% William Blair International Growth (WBIGX)

VASGX is a fund of funds. It or VFINX or Total Stock Market Index (VTSMX) (E.R. 0.19) should represent the core or majority (largest) holding of your portfolio. I'd suggest Mid-Cap Index (VIMSX) (E.R. 0.22) over (VMGRX): it's ER is half off, it's Bear Market Rank is 5, not 9, and it's a Morningstar Analyst Pick. Notice that your non-Vanguard funds have much higher E.R. Are there any Vanguard Small Cap or Foreign available?

 

[OS]

international has done great for the past year, i think it benefits also from falling dollar, but at the same time i wonder when the ride will be over. Unfortunately, it seems a bit hard to find atleast average P/E ratio for international indexes.

 

[shuttleboi]

Originally posted by: alrocky

Originally posted by: shuttleboi
I'm setting up a vanguard 401k too. I'm around 30. I would like to be aggressive at this point. Any comments?

E.R.
0.18 10% Vanguard 500 Index Fund Investor Shares (VFINX)
0.31 10% Vanguard Equity Income Fund (VEIPX)
0.26 10% Vanguard Life Strategy Growth (VASGX)
0.47 10% Vanguard Mid-Cap Growth (VMGRX)
0.20 10% Total Bond Market Index Fund (VBMFX)
1.49 25% Royce Low-Priced Stock Service (RYLPX)
1.42 25% William Blair International Growth (WBIGX)

VASGX is a fund of funds. It or VFINX or Total Stock Market Index (VTSMX) (E.R. 0.19) should represent the core or majority (largest) holding of your portfolio. I'd suggest Mid-Cap Index (VIMSX) (E.R. 0.22) over (VMGRX): it's ER is half off, it's Bear Market Rank is 5, not 9, and it's a Morningstar Analyst Pick. Notice that your non-Vanguard funds have much higher E.R. Are there any Vanguard Small Cap or Foreign available?

Unfortunately, my company's 401k does not have any other international or small-cap funds. We only have like a dozen funds.

Is expense ratio the primary concern for choosing funds for one's 401k?

 

[alrocky]

Originally posted by: shuttleboi
Unfortunately, my company's 401k does not have any other international or small-cap funds. We only have like a dozen funds.

Is expense ratio the primary concern for choosing funds for one's 401k?

No. Your asset allocation is. First is the ratio of stocks to bonds. 10% bonds is plenty aggressive. The 3 major stock asset classes are Large Cap, Small Cap, and Foreign. You could have a well diversified portfolio picking just one fund from each of the 3 classes. Expense ratio is a primary consideration for a mutual fund choice within each of those asset classes.

Vanguard is the king of low expenses. The two non-Vanguard funds in your list look expensive in comparision. Note that small cap and foreign tend to have higher E.R. anyway.

---
VASGX (a fund of funds) holds:

49.9% Vanguard Total Stock Market Index Fund
24.9% Vanguard Asset Allocation Fund
15.2% Vanguard Total International Stock Index Fund
10.0% Vanguard Total Bond Market Index Fund

Total Stock Market can be broken down to 500 + Extended Market (7:3 ratio)

Total International =
58.5% Vanguard European Stock Index Fund
26.1% Vanguard Pacific Stock Index Fund
15.4% Vanguard Emerging Markets Stock Index Fund
---

What other funds are available in your 401(k)?

 

[JEDI]

30% foreign?!

sure, it did great last year. but you're chasing returns if you put that much there for that reason.

If that's not the reason, then why is everyone so heavy on Intl? (i usually do 20% intl, and currently have a slight tilt to emerging markets.)

 

[alrocky]

The US stock market comprises about half of the world's trade-able stocks. Recommendations on the amount of foreign range from 20-40% of your equity allocation. W. Bernstein in The Four Pillars of Investing has a suggested asset allocation ratio of 8:4:5 for Large-Cap : Small-Cap : Foreign. Allowing for a bond allocation of 10%, 8:4:5 translates to:

42% - 500 Index Fund - VFINX
21% - Small-Cap Index Fund - NAESX
27% - Total International Stock Index Fund - VGTSX
10% - Total Bond Market Index Fund - VBMFX

30% foreign is within spitting distance of Berstein's 8:4:5. If 30% foreign raised your eyebrow, the portfolio suggested earlier should've dropped your jaw; compare the above asset allocation to the out of whack one below - 10:50:25 for Large : Mid/Small : Foreign.

5% Retirement Savings Trust 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

 

[Feldenak]

Anyone have any experience with Principal's management? Our 401k plan is managed through them.

 

[JEDI]

Originally posted by: 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.

Where do you get 2:2:1 ratio for large/mid/small cap from?

add that to the 2:1 us:foreign ratio, you get (assuming 10% bonds):
24% large
24% mid
12% small
30% intl
10% bonds

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