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401k Question
Old 04-10-2008, 01:33 PM   #1
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401k Question

How many here utilize only one fund in their 401k, or a minimum amount of funds. I am trying to minimize fees and have access to Growth fund of America and several other funds. This fund is the lowest ER available, even lower than the S+P index fund offered. I currently have a 50/50 split between Growth fund and Thornburg International Value. However there is also a great small value fund (keely small value) that I would like to invest in but I do not want to be in too many funds. I do not own any other investments other than my 401k, due to financial constraints. I am 31/married/two year old son. Any advice would be good.
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Old 04-10-2008, 01:52 PM   #2
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I'd read this post: Bogleheads :: View topic - Asking Portfolio Questions

And then ask this question on the diehards forum here: Bogleheads :: View Forum - Investing - Portfolio Help

You will get alot of good advice there. Not that the advice here won't be good as well but they have a "system" in place and answer these kinds of questions several times a day.

Good Luck

DD
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Old 04-10-2008, 02:36 PM   #3
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I am far off from their philosophy so I did not want to ask there as I knew what they would say. I am a buffett style investor, I want to concentrate as much as possible. I do not want too much diversification, but the international tilt is ok with me especially in this market.
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Old 04-10-2008, 02:58 PM   #4
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Currently using eight different funds in my 401k (It was 10), will be shrinking to about six over the next year or so. I do want fewer funds for simplification (while maintaining target AA) and I am working to reduce my expense rate as I buy lower cost funds outside the 401K and then shift within the 401k.
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Old 04-10-2008, 03:09 PM   #5
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I've got all my 401k in an S&P 500 index fund, because their choices were crap and it had the lowest expense ratio.

Combine that with rollover IRA, Roth IRAs, and wife's assets to have 401k fulfill the S&P 500 index role in overall asset allocation strategy.
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Old 04-10-2008, 03:15 PM   #6
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Should I choose the S+P 500 (ER 0.73) over the Growth Fund (ER 0.64) even if the Growth fund has better returns over the last 30 years? I do not know if it will outperform due to asset bloat, as it is the largest mutual fund, even bigger than Vanguard index 500.
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Old 04-10-2008, 04:25 PM   #7
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My core portfolio is 5 funds. Large cap, mid cap, small cap for domestic and large cap and small cap for international. Bonds is a 6th fund.

I consider my positions diversified (most funds I own hold 100+ stocks). My suggestion would be to use the 3 you commented on, then add more as you see your risk tolerance change.
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Old 04-10-2008, 06:24 PM   #8
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Yikes S&P .73 and a (I assume LC) growth fund at .64 is a little on the high side.
My S&P is 0.05% and I think I'm about .36 on a LC growth fund, in a moment I expect some others to post rates that will make me feel like I'm getting abused at these rates. I am still paying almost 1.5% on a SV fund which I am selling as I buy VBR, IWN at much better rates.
As far as which fund to buy I think it's probably a coin toss between the two and 30 years will tell.
Do you get any kind of a match? What other types of IRA's are you eligible for? Are you maxing those out? The company 401k is certainly easy but don't forget you do have options.
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Old 04-10-2008, 06:33 PM   #9
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usually the same funds within a 401k have much higher e.r. than outside the plan. i have my 401k at fidelity and own the same funds in my taxable account as well. theres about 1/3 to 1/2% difference
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Old 04-10-2008, 07:56 PM   #10
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Quote:
Originally Posted by mathjak107 View Post
usually the same funds within a 401k have much higher e.r. than outside the plan. i have my 401k at fidelity and own the same funds in my taxable account as well. theres about 1/3 to 1/2% difference
Well, that really depends on the plan. The costs may be higher due to additional expenses needed to cover plan administration, but in a lot of larger plans you'll see just the opposite if they are using institutional class shares versus regular/investor class shares.

In regards to the original question, that ER for an S&P index fund is high. And it looks like you're paying the standard AGTHX expenses. Is that being offered with no front-load? If the growth fund fits your asset allocation and there isn't a load, that wouldn't be a bad choice. It is a fine fund. But to go with the index fund just to save 9 basis points shouldn't be a determining factor.
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Old 04-10-2008, 08:45 PM   #11
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I was in just one fund in my 401(k), Fidelity Freedom 2035 (expense ratio 0.81%), but recently shifted 85% of my total balance out of it into an allocation of 10 funds (61% indexed, 39% actively managed), with a blended ER of 0.27%. Not hard to manage at all if you spend a little time putting together a spreadsheet to help with allocation and rebalancing. IMO, worth the effort to save over 0.5% per year

I kept 15% in the Freedom fund just as a benchmark to match/beat with my picks.

Overall 401(k) blended ER is 0.35% which I can live with.
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Old 04-10-2008, 08:49 PM   #12
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The ER on my 401(k) S&P 500 index fund is 0.005%

I would take the to your plan administrator!
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Old 04-11-2008, 06:54 AM   #13
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I'm invested in about 5 funds. about 5% in bonds, the rest in 500 Index fund, international, and large cap growth. I'm also only 25 so my portfolio is a bit a aggressive and high risk. I consolidated down from 10 funds to try and reduce my ER last year when I started learning about investing. Some funds just rip you off!
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Old 04-11-2008, 07:22 AM   #14
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I have 6 funds in 401k, 3 funds in my IRA, 3 funds in DW's IRA. 2 funds in the brokerage account.

As a *note* - I include my largest AA fund (international) in each of the funds. That way, I can re-balance across all the various accounts easily to my AA.
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Old 04-11-2008, 08:25 AM   #15
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I get a 50% match up to 6% all in cash right along with my contributions. The rest of the funds are weak, all loaded funds with high ER's (I do not have to pay the load though). It seems like a three way split between Growth fund (or 500 index)/keeley small value/thornburg international value might be good with either a 34/33/33 split or a 30/30/30 split with 10% in tips fund (american century inflation adjusted also included in 401k). I may lean more towards the index fund since growth fund is such a collection; 20% international, up to 15% in bonds/cash. Plus its so big I don't see how it can beat the index even if it is cheaper ER. What do you all think?

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Old 04-11-2008, 09:26 AM   #16
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I have 3 funds in my 401k (mostly b/c the rest of the choices have really high fees). I have 65% in a S&P index, 30% in an international index, and 5% in a bond index.

Also, if you really hate the fund choices, you could use the 401k as your main U.S. growth index, and then diversify your holdings outside of the 401k.
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Old 04-11-2008, 09:31 AM   #17
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I have no other investments outside 401k due to financial constraints at this time. Eventually I will fund my IRA as well.
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Old 04-11-2008, 11:26 AM   #18
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Quote:
Originally Posted by dougie790 View Post
I have no other investments outside 401k due to financial constraints at this time. Eventually I will fund my IRA as well.
Sorry, I need to be a more careful reader!
In that case I would just stick with the lowest cost options and the three-way split you mentioned.
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Old 04-11-2008, 11:54 AM   #19
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At this point I have 11 funds in my 401Ks and IRA. Eventually I will cut back the number. But, at this point I like the way I have them set up. They are clearly set up in buckets - at least it is clear to me!
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Old 04-11-2008, 11:56 AM   #20
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That 11 includes my after tax investments also.
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