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Old 06-10-2009, 09:25 AM   #21
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Slice and dice is EASY in a 401k! No fund minimum, no taxes and tax basis to track. That's the place to start, even with just a few bucks. No need to track it closely, especially if you can split contributions to all your funds.

It's not until you start up a taxable account that it gets painful. Then I would recommend simplicity for those that don't want to spend the time.
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Old 06-10-2009, 09:28 AM   #22
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It's not until you start up a taxable account that it gets painful. Then I would recommend simplicity for those that don't want to spend the time.
Yep. All I have in my taxable investment account is one "total market index" fund and a little bit of Berkshire Hathaway B. All of my bonds are in the IRAs and my 401K for tax efficiency.

It's way too much of a tax hassle to deal with many funds and rebalancing in the taxable account for me, especially since I don't have all that much in taxable accounts.
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Old 06-10-2009, 12:09 PM   #23
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I agree mostly with Kronk, but I also want to point that TIAA-CREF has shown that many folks set their 403(b) / 401(k) allocations when they are first employed and then never bother to ever change them. So I think it involves a more than cursory look, but it's true that whatever is done now won't make a big difference over the next couple of years.
Hrm. Good point. This is T-Al's daughter, though, so she's more likely to be one of those people who actually do track it.

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Slice and dice is EASY in a 401k! No fund minimum, no taxes and tax basis to track. That's the place to start, even with just a few bucks. No need to track it closely, especially if you can split contributions to all your funds.

It's not until you start up a taxable account that it gets painful. Then I would recommend simplicity for those that don't want to spend the time.
Well, true, it is easy. Just slap in some percentages and go. So maybe I'm on a personal simplicity kick and just projecting that onto this problem. I don't feel strongly enough about it to continue with much of an argument, though. She's buyng (has bought?) a car, moving (has moved?), starting her first job out of school. With all that going on, go for the simplest solution until the amount matters, then figure out if she's saving anything after-tax and construct portfolio allocations at that point.
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Old 06-11-2009, 01:33 AM   #24
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Teaching/showing a kid the benefit of asset allocation is a great thing. You should see what my kid picked. It was awful, but understandable. The advice he received from his mega-employer was pretty shallow. He picked funds appropriate for a retiree, not a 26-year old.

It didn't take much time to explain the basics to him, and then reallocate.

I would never advise someone to dump it all in one fund, unless it was an appropriate target fund, with low expense ratio.
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Old 06-12-2009, 09:19 AM   #25
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I'll be the contrarian.
How secure is her job? Engineering sounds good, but I don't know the real situation.
Is she getting into a bunch of monthly commitments (car loan, student loans, lease, cell phone, cable TV,...)?
Does she have an emergency fund?

For some young people, a 401k is the most practical way to set up an emergency fund. They don't want to miss the company match, but maybe retirement savings should wait until the emergency fund gets built up. The result is a 401k with 100% allocation to the stable value fund.

Their biggest risk is getting downsized when the economy is in the tank. In that situation, they're going to use the 401k to meet the basic expenses, and they don't want to bear the loss of selling in a down market.

(Of course there are other factors. Maybe the job is very secure, or the job market is very good. Maybe Dear Dad is the real emergency fund. These facts would change the decision.)
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Old 06-12-2009, 09:21 AM   #26
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...or the job market is very good.
Wow, there's a little nostalgia for you...
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RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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