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401K allocation and options
Old 12-20-2013, 12:04 PM   #1
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401K allocation and options

Hey guys,

I am about to enroll in my 401k at work. Looks like there are some good options but nothing to great. They are Below:

Specialty:
BlkRk Natrl Rsrc Tr Inst (MAGRX) Exp Ratio= .86%
FnklnTmp Glbl Bd Adv (TGBAX) Exp Ratio- .66%
NeuBer RealEst Inst (NBRIX) Exp Ratio - 1.11%

International Stocks
NW Intl Indx Inst (GIXIX) Exp Ratio - .33%
Okmrk Intl I (OAKIX) Exp Ratio - 1.06%
Opp Devl Mkt Y (ODVYX) Exp RAtio - 1.03%

Smallcap Stocks
Jns Triton T (JATTX) Exp Ratio -.95%

Midcap Stocks
Prncpl MdCap Blnd Inst (PCBIX) Exp Ratio - .65%
Vngrd Extnd Mkt Indx Sgnl (VEMSX) Exp Ratio - .14%

Largecap Stocks

JPM Val Advtg Inst (JVAIX) Exp Ratio - 1.03%
NeuBer Eq Inc Inst (NBHIX) Exp Ratio - .71%
Tchstn Sands Cap Inst Gr (CISGX) Exp Ratio - .80%
Vngrd 500 Indx Sgnl (VIFSX) Exp Ratio - .05%

Then there is Balanced options using T rowe price retirement target date funds but high expense ratios.

Bonds:

DFA Intmd Govt FxdInc Inst (DFIGX) Exp Ratio - .12%
FidAdv Hi Inc Advtg Inst (FAHCX) Exp Ratio - .78%
MetroWest Ttl Rtn Bd I (MWTIX) Exp Ratio - .41%
NeuBer Strat Inc inst (NSTLX) Exp Ratio - .90%

I am 27 years old so i know i can be aggressive. just not sure what my allocation should be. Small percentage in bonds or all stocks?

For stocks, looks like a smart idea to give with Vanguard Extended Mkt Index signal for mid cap, Vanguard 500 for large cap and possibly the GIXIX for international stock. Trying to figure out some good % to put towards each option. Let me know your take on this.
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Old 12-20-2013, 02:21 PM   #2
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I like your picks. I'd go for 100% equities, though it depends greatly on if you can keep from selling when the market crashes. Your return should not be hurt with something like 15% bonds, depending on future performance of course.

Looking at a chart, I don't think GIXIX looks like it is keeping up with similar index funds (EFA, FSIIX). I like OAKIX. I use several Oakmark funds, though that's not one of them. However, OAKIX is doing well and I'd consider that as an international option.
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Old 12-20-2013, 02:34 PM   #3
Confused about dryer sheets
 
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You think the OAKIX would be better even though the expense ratio is much higher?

Also, if i am going with the vanguard funds, what is a good percentage to break between the stock funds( as in how much % to each fund)
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Old 12-20-2013, 03:25 PM   #4
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Quote:
Originally Posted by bdelgaudio View Post
You think the OAKIX would be better even though the expense ratio is much higher?

Also, if i am going with the vanguard funds, what is a good percentage to break between the stock funds( as in how much % to each fund)
From Morningstar:

Performance GIXIX FSIIX OAKIX
10 year annualized 6.82% 6.96% 10.53%
10 year growth of $10k $19,345 $19,574 $27,204
Those numbers are net of the expense ratio, so yes I think OAKIX is better. Though GIXIX doesn't look as bad as my initial chart check indicated. It is a reasonable index fund, just a little more expensive than some.

I do use index funds when I can't find something I like better, but I'm still willing to use active funds in cases like this. Morningstar rates OAKIX as gold, so they like it too.

I'd try to balance the two US funds to match the total stock market, or favor the smaller caps a little bit. I don't know what those percentages would be, but someone must have that info.
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Old 12-20-2013, 03:50 PM   #5
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I looked up VIFSX and it's "The Fund employs an indexing investment approach designed to track the performance of the Standard & Poor‘s 500 Index", so I'm not sure if there's really any difference between that and VFINX.

Here's what I'd do: Decide how much exposure I want to large cap vs mid cap vs international vs bonds (and yeah, bonds probably should be very low).
Plug VEMSX, GIXIX, VIFSX and DFIGX into Morningstar's "Instant x-ray" until you get the split you want.

So say you wanted 20% US large cap, 20% US mid cap, 10% US bonds, and 50% Foreign bonds. You'd put in VEMSX, GIXIX, VIFSX and DFIGX and keep iterating until you hit those values.

One thing to consider is what you do with the non-retirement assets. Those will certainly include some cash, but might also include some hard assets, like real-estate or mining equities. This would round-out your overall asset allocation. You can get less expensive hard assets outside of your plan.

The picks I've made were based on expense ratios; low ones have proven to be the best indicator of success (not past performance).
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Old 12-20-2013, 04:25 PM   #6
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Your choice is spot on and 100% equities at your age. Good luck!
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Old 12-23-2013, 05:03 PM   #7
Confused about dryer sheets
 
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Hi fellow newbie!

To try to answer your questions: I believe the breakdown of the U.S. market by cap generally hovers around 75-80% S&P 500 and 20-25% extended market. (Though, I'm not an expert or a financial advisor. I found this information on Morningstar's website, looking at the portfolio of VTSMX, which is Vanguard's total U.S. stock market index.)

DH and I tend to overweight small caps a bit. Our ratio is 66% large to 33% the rest, but you should do what makes you most comfortable.

As for international, that gets tricky, especially depending on who you ask. Vanguard (I think...) has put out studies showing what allocation to international stocks would have yielded the best returns in the past. It's something like 20-40%, I believe, but don't quote me. Other research buffs argue for a 50/50 split between U.S. and international stocks.

So for you, with 100% in equities, and a 70/30 split between US and International:

49-53% VIFSX
17-21% VEMSX
30% GIGIX

With a 50/50 split between US and International:

35-38% VIFSX
12-15% VEMSX
50% GIGIX

DH and I are aggressive. We allocate by world market cap. In our taxable accounts, we simply use the Vanguard Total World Stock Index (and we use it as a benchmark in our 401k/Roth allocations). Right now, according to Morningstar's breakdown of VTWSX, the US accounts for about 45% of the equities in the world, developed international 45%, and emerging markets 10%. We follow this model because even though we know that the U.S. has been king of the world for a long time, we aren't sure this will continue forever. We aren't sure it won't either, so we just let the market decide. Again, just our preference. Eventually, you'll have to decide what makes you most comfortable.

Some posters have said you should be in 100% equities at your age. That's generally considered good advice. A slightly more conservative approach is to hold bonds in the same percentage as your age, but this gets too conservative in retirement some believe. People handle this in many different ways. DH and I are about 5 years older than you and have opted for a moderate growth portfolio in terms of our stock/bond split. We're at 60/40, which by conventional standards, is too conservative. (Though, we do invest a portion of our bond portfolio in international and emerging markets as well.) But we save large amounts of principle, so we can afford to be a little more conservative, and we do not intend to make our allocation more conservative with age. This is a permanent portfolio for the most part.

Different strokes for different folks.

Good luck!
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Old 12-26-2013, 10:40 PM   #8
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At 27, I would put 0% in bonds.

I started with $5k in my 401k at age 27 back in 2000. Now my 401k is at $300k despite 2 major crash. So my advice is to go 100% equity and ride through the bear market since you're not touching that money for another 30 years. At your age, another bear market would be great for you!
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Old 12-30-2013, 09:10 AM   #9
Confused about dryer sheets
 
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Hey guys.

Looks like i had more options than i thought. There are many Vanguard options. Trying to see if i switch up my current choices and choice some of these below.


Vngrd 500 Indx Sgnl Large-Cap Stocks
Vngrd Bal Indx Sgnl Balanced
Vngrd Divd App Indx Inv Large-Cap Stocks
Vngrd Divd Gr Inv Large-Cap Stocks
Vngrd Divrs Eq Inv Large-Cap Stocks
Vngrd Emrg Mkt StkIndxSgnl International Stocks
Vngrd Enrgy Inv Specialty
Vngrd Eq Inc Inv Large-Cap Stocks
Vngrd Euro Stk Indx Sgnl Specialty
Vngrd Explr Inv Small-Cap Stocks
Vngrd Extnd Mkt Indx Sgnl Mid-Cap Stocks
Vngrd FTSE Soc Indx Inv Large-Cap Stocks
Vngrd GNMA Inv Bonds
Vngrd Glbl Eq Inv International Stocks
Vngrd Gr Inc Inv Large-Cap Stocks
Vngrd Gr Indx Sgnl Large-Cap Stocks
Vngrd Hlth Care Inv Specialty
Vngrd Infl Prtct Sec Inv Bonds
Vngrd Intl Explr Inv International Stocks
Vngrd Intl Gr Inv International Stocks
Vngrd Intl Val Inv International Stocks
Vngrd Intmd Trm Trsry Inv Bonds
Vngrd IntmdTrmInvmtGrd Inv Bonds
Vngrd LT Invmt Grd Inv Bonds
Vngrd LT Trsry Inv Bonds
Vngrd MdCap Gr Indx Inv Mid-Cap Stocks
Vngrd MdCap Gr Inv Mid-Cap Stocks
Vngrd MdCap Val Indx Inv Mid-Cap Stocks
Vngrd Mrgn Gr Inv Large-Cap Stocks
Vngrd Pacfc Stk Indx Sgnl Specialty
Vngrd Prec Mtls Mining Specialty
Vngrd REIT Indx Sgnl Specialty
Vngrd STAR Inv Balanced
Vngrd Sel Val Inv Mid-Cap Stocks
Vngrd SmCap Gr Indx Inv Small-Cap Stocks
Vngrd SmCap Val Indx Inv Small-Cap Stocks
Vngrd Strat Eq Inv Mid-Cap Stocks
Vngrd Strat SmCap Eq Inv Small-Cap Stocks
Vngrd Trgt Rtrmt 2010 Inv Balanced
Vngrd Trgt Rtrmt 2015 Inv Balanced
Vngrd Trgt Rtrmt 2020 Inv Balanced
Vngrd Trgt Rtrmt 2025 Inv Balanced
Vngrd Trgt Rtrmt 2030 Inv Balanced
Vngrd Trgt Rtrmt 2035 Inv Balanced
Vngrd Trgt Rtrmt 2040 Inv Balanced
Vngrd Trgt Rtrmt 2045 Inv Balanced
Vngrd Trgt Rtrmt 2050 Inv Balanced
Vngrd Trgt Rtrmt 2055 Inv Balanced
Vngrd Trgt Rtrmt 2060 Inv Balanced
Vngrd Trgt Rtrmt Inc Balanced
Vngrd Ttl StkMkt Indx Sgnl Large-Cap Stocks
Vngrd US Gr Inv Large-Cap Stocks
Vngrd US Val Inv Large-Cap Stocks
Vngrd Val Indx Sgnl Large-Cap Stocks
Vngrd Wlsly Inc Inv Balanced
Vngrd Wndsr II Inv Large-Cap Stocks
Vngrd Wndsr Inv Large-Cap Stocks
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