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My Overly Simplistic Asset Allocation
Old 08-08-2008, 02:01 PM   #1
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My Overly Simplistic Asset Allocation

It seems like there have been quite a few threads on this subject lately, although everyone has a different situation and pool of funds to choose from. In a few weeks I will be eligible to enroll in my company's 401(k). I'd like to get some feedback on my AA.

Basic stats: 30 y.o., would like to retire by 50 or 55. Currently have 457(b) with ING and some funds in Vanguard. New company only has limited choices with Fidelity. I have never owned any Fidelity funds before.

My personal belief is that the US's dominance in the world market will go down in the future. I would like my asset allocation to be:

Domestic Equity= 50%
Intl Equity= 30%
Bond= 20%

I like the idea of "target retirement date" funds, but I feel that the mix is too US-oriented. For example, 65% of the Fidelity Freedom 2035 fund is in US equities, while international equities only comprise of 17%, the rest being bonds.

So I think I'd like the following asset allocation:

Fidelity Freedom 2040 - 75% of 401(k)
--> This includes 50% in US equities, 12% in foreign equities, and 13% in bonds

Fidelity International Discovery - 17% of 401(k)

Fidelity Total Bond - 8% of 401(k)

In my overall portfolio, I'd like 5% in REIT Index and 5% in some other fund (perhaps commodity index, just to mix things up). But they are not choices for the 401(K).

My allocation seems a little too simple, so I'm wondering if I'm missing anything. Please advise.
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Old 08-08-2008, 02:07 PM   #2
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I personally believe it's best to keep it simple. Having 5 or so index funds can certainly cover a reasonable asset allocation.
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Old 08-08-2008, 02:20 PM   #3
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what fidelity funds are available to you?
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Old 08-08-2008, 02:21 PM   #4
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That seems reasonable for a simple allocation. Maybe a little early for 20% bonds, but that's just me. Those should be decent enough funds, but you might list your other choices so we know what the other choices are. I like to weight small caps and value a little more than Fidelity Freedom as well.
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Old 08-08-2008, 02:29 PM   #5
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Sure! Here is what's available to us:

Investments1 YR3 YR5 YR10 YRLifeAs of DateStock Investments

Large Cap
FID CAP APPRECIATION
Inception Date 11/26/1986 -13.242.958.335.6811.0607/31/2008

FID DISCIPLINED EQTY
Inception Date 12/28/1988 -9.154.118.784.3411.5107/31/2008

FID LARGE CAP VALUE
Inception Date 11/15/2001 -14.002.368.92N/A5.6707/31/2008

SPARTAN US EQ INDEX
Inception Date 02/17/1988 -11.152.796.932.7910.2907/31/2008

Mid-Cap
BARON ASSET FUND
Inception Date 06/12/1987 -8.124.5111.925.8412.0307/31/2008

FID LEVERAGED CO STK
Inception Date 12/19/2000 -2.7611.7120.71N/A19.5907/31/2008

FID VALUE
Inception Date 12/01/1978 -16.162.2610.818.3413.2007/31/2008

Small Cap
FID SM CAP INDEPEND
Inception Date 06/28/1993 -18.161.648.815.288.0007/31/2008

LOOMIS SM CAP VAL R
Inception Date 05/13/1991 -7.984.0910.889.239.7007/31/2008

International
FID INTL DISCOVERY
Inception Date 12/31/1986 -9.7212.3717.218.899.4807/31/2008

SPARTAN INTL INDEX
Inception Date 11/05/1997 -12.1010.4815.145.356.5607/31/2008

Blended Investment*
FID FREEDOM 2000
Inception Date 10/17/1996 -0.813.644.524.626.1307/31/2008

FID FREEDOM 2005
Inception Date 11/06/2003 -3.834.10N/AN/A5.2807/31/2008

FID FREEDOM 2010
Inception Date 10/17/1996 -3.794.276.285.247.2807/31/2008

FID FREEDOM 2015
Inception Date 11/06/2003 -4.814.55N/AN/A6.1307/31/2008

FID FREEDOM 2020
Inception Date 10/17/1996 -6.234.737.775.207.5507/31/2008

FID FREEDOM 2025
Inception Date 11/06/2003 -6.974.68N/AN/A6.7607/31/2008

FID FREEDOM 2030
Inception Date 10/17/1996 -8.424.778.324.907.3507/31/2008

FID FREEDOM 2035
Inception Date 11/06/2003 -8.884.70N/AN/A7.1307/31/2008

FID FREEDOM 2040
Inception Date 09/06/2000 -9.194.788.69N/A0.8207/31/2008

FID FREEDOM 2045
Inception Date 06/01/2006 -9.50N/AN/AN/A2.2607/31/2008

FID FREEDOM 2050
Inception Date 06/01/2006 -10.03N/AN/AN/A2.1107/31/2008

FID FREEDOM INCOME
Inception Date 10/17/1996 -0.183.564.154.405.3007/31/2008

Bond Investments
Income
FID TOTAL BOND
Inception Date 10/15/2002 3.213.424.33N/A4.6007/31/2008

Short-Term Investments
FIDELITY RETIRE MMKT
Inception Date 12/02/1988
7 day yield as of
07/31/2008 2.46% 3.954.423.213.574.5607/31/2008 Important Legal Information

I'm usually a low-cost index kind of person, so managed funds are new to me. Thanks very much for your help.
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Old 08-08-2008, 02:33 PM   #6
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Quote:
Originally Posted by GoodSense View Post
Domestic Equity= 50%
Intl Equity= 30%
Bond= 20%
Incidentally, this is my allocation as well. I also have a bit more of a stake (compared to overall market) in REITs and small cap. For what is worth, I am 34.

I see no need to hold lots and lots of funds, and instead and I have directed my efforts in maintaining this simple allocation.

Couple of points to consider, you may want to view all your accounts (401k, old IRA/401ks, taxable) as one portfolio -- this further simplifies things. I manage my and DH's accounts as one and simply pick the best available option within each in support of the basic AA. I see you have already decided to add a bit more of international to your 401k, this could also be accomplished by keeping additional international funds (similar to your proposal to handle REITs) in other accounts. You're already committed in having more than one fund, so pick the best funds available (across all accounts) and implement your allocation.
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Old 08-08-2008, 02:36 PM   #7
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If you like index funds... you should consider spartan us eq and spartan international -- very low ERs. Keep in mind, though, spartan international has no EM exposure. Good luck!
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Old 08-08-2008, 03:38 PM   #8
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Thanks! I will look at my overall AA again. I did a pie-chart before I went to the recent local Bogleheads meeting, and it's roughly where I wanted it to be.

I'll look more into the Spartan funds. I saw the Spartan International fund but it only had 3 stars according to Morningstar. But I don't really know the significance of that. Will look into it. Thanks!
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Old 08-08-2008, 04:21 PM   #9
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i too would recommend the spartan index funds (us equity & international), and total bond has been good... that would leave some holes (em, small and mid cap) ... which you could fill elsewhere if you felt the need. i've previously looked at the freedom funds but haven't been impressed.
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Old 08-08-2008, 06:14 PM   #10
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Quote:
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Thanks! I will look at my overall AA again. I did a pie-chart before I went to the recent local Bogleheads meeting, and it's roughly where I wanted it to be.

I'll look more into the Spartan funds. I saw the Spartan International fund but it only had 3 stars according to Morningstar. But I don't really know the significance of that. Will look into it. Thanks!

Ignore this. Go with the Spartan funds, add REIT's and EM in your IRA if you want to spice it up a little. FYI I use all 3 in my 401a as I only have access to Fidelity there, my 403b is all Vanguard .

DD
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