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401k asset allocation
Old 08-03-2008, 11:46 PM   #1
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401k asset allocation

I'm 23 and just started working a few months ago. My company offers a 401k, and currently my money is all going into a Fidelity Freedom 2050 plan. I read that these types of "fund of funds" aren't a good idea because fees and funds usually overlap, and that some bad funds are thrown in so the companies like Fidelity can make a little off of those.

I also read that since the asset allocation of the Freedom 2050 plan is available, it should be possible to manually allocate assets based on a similar strategy.

I found the breakdown of the Freedom 2050 plan (Fidelity Investments:), but I don't really know what to do from there...

The funds available to me are:
Stock Investments
LARGE CAP
ALLNZ NFJ DIV VAL I
FID CAP APPRECIATION
FID CONTRAFUND
FID GROWTH COMPANY
SPARTAN US EQ INDEX

MID-CAP
ALGER MIDCAP GRTH I
FIDELITY LOW PR STK

SMALL CAP
ABF SM CAP VAL INST
BARON SMALL CAP

INTERNATIONAL
FID DIVERSIFIED INTL
FID WORLDWIDE


Blended Fund Investments*
FID FREEDOM 2000
FID FREEDOM 2005
FID FREEDOM 2010
FID FREEDOM 2015
FID FREEDOM 2020
FID FREEDOM 2025
FID FREEDOM 2030
FID FREEDOM 2035
FID FREEDOM 2040
FID FREEDOM 2045
FID FREEDOM 2050
FID FREEDOM INCOME


Bond Investments
STABLE VALUE
FID MGD INC PORT

INCOME
FID TOTAL BOND


I also read that Money Magazine recommends that for someone in my "stage of life" (35+ years to retirement) should have their retirement money invested like so:
  • 50%--large cap stocks
  • 15%--mid cap stocks
  • 15%--bonds
  • 10%--small cap stocks
  • 10%--international stocks
I have random bits of pieces of information here and there........ help? I wanna be able to just set up my retirement funds and forget about them for like 5 years or whenever I reach the next "stage of life."
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Old 08-04-2008, 09:11 AM   #2
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Do you have any other retirement savings? I have my 401K in the S&P500 equivalent because it's the cheapest maintenance fee at .37% compared to the rest of the options which are around 1.5%. I am using my Roth IRA and other savings to balance out and get some international exposure with VTWSX. I didn't get the VTWSX yet but that's the plan. This is all a relatively new strategy for me.

-Raymond
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Old 08-04-2008, 09:32 AM   #3
Confused about dryer sheets
 
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No, I don't. My company matches 3%, and I'm currently putting in 7% of my income for a total of 10% of my income. That's what this calculator said I should be putting in: Calculators - Retirement Planner

In the end, I would like to reduce my personal contribution to 3% just to take advantage of my employee matching, and put the 4% elsewhere. I've hard that Vanguard is good because they do not charge a lot of overhead on their funds.

But... I want to allocate this Fidelity 401k correctly first before I move on to setting up another account.
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Old 08-04-2008, 09:41 AM   #4
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Do you have a taxable account right now as well or will that not be set up until you drop to 4%?

Can you post the expense fees for each? The fund detail page should tell you for each.

Also, as another source to Money, I would check out:

sample portfolios: Category:Portfolios - Bogleheads

Boglehead's Guide to Investing (you can get it at a library, or buy it rather cheap)

Then read these books when you have a chance: Investment Books

At the least, you'll be more informed before you decide on a course of action or inaction.

For our accounts, we put the cheapest or most inefficient stuff in our 401(k)'s and then balanced out to get our asset allocation with tax-efficient funds in our taxable account. We're 80% stock / 20% bonds but moving to change out 10% of the stocks for REITs. In the stock part of the pie, we're actually about 50% international as that's where we feel most comfortable sleeping at night.
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Old 08-04-2008, 08:24 PM   #5
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Quote:
help? I wanna be able to just set up my retirement funds and forget about them for like 5 years or whenever I reach the next "stage of life."
You could do far worse then just leaving it in a target retirement fund, especially if you want to just "forget about it". If you slice and dice then you will need to manage the account. I would highly recommend reading from this list before making any decisions: Investment Books

DD
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Old 08-04-2008, 08:52 PM   #6
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Quote:
Originally Posted by cumptrnrd View Post
This is a confusing calculator. It tried too hard to be smart.

-Raymond
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Old 08-04-2008, 09:20 PM   #7
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Until you have reason to know better, I'd stick with the target fund you already have. If you are thinking if learning enough to set up your own asset allocation, you probably should read the books and maybe hang out with the Bogelheads for a while. I'd also suggest no longer reading Money Magazine until you understand and can spot their self interests and how it differs from yours.
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Old 08-05-2008, 02:38 PM   #8
Confused about dryer sheets
 
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Here are the fees and stuff that are available to me:
ALLNZ NFJ DIV VAL I
Management fee: 0.45%
Expnse Ratio as of 12/31/2007: 0.67%

FID CAP APPRECIATION
Management fee: 0.60%
Expense Ratio as of 12/29/2007: 0.83%
Expense Ratio after Reductions as of 04/30/2008: 0.84%

FID CONTRAFUND
Management fee: 0.71%
Expense Ratio as of 02/29/2008: 0.89%
Expense ratio after Reductions as of 12/31/2007: 0.89%

FID GROWTH COMPANY
Management fee: 0.73%
Expense Ratio as of 01/29/2008: 0.94%
Expense Ratio after Reductions as of 05/31/2008: 0.94%

SPARTAN US EQ INDEX
Management fee: 0.07%
Expense ratio as of 04/29/2008: 0.10%
Expense ratio after Reductions as of 02/29/2008: 0.09%

ALGER MIDCAP GRTH I
Management fee: 0.76%
Expense Ratio as of 04/30/2008: 1.17%

FIDELITY LOW PR STK
Short-term trading fee: 1.50%
Short-term fee period: 90 days
Management fee: 0.80%
Expense ratio as of 09/29/2008: 0.97%
Expense ratio after reductions as of 01/31/2008: 0.99%

ABF SM CAP VAL INST
Management fee: 0.50%
Expense ratio as of 03/01/2008: 0.81%


BARON SMALL CAP
Management fee: 1.00%
Expense ratio as of 03/30/2008: 1.31%

FID DIVERSIFIED INTL
Short-term trading fee: 1.00%
Short-term fee period: 30 days
Management fee: 0.78%
Expense ratio as of 12/29/2008: 0.93%
Expense ratio after reductions as of 04/30/2008: 1.02%

FID WORLDWIDE
Short-term trading fee: 1.00%
Short-term fee period: 30 days
Management fee: 0.87%
Expense ratio as of 12/29/2008: 1.04%
Exnepse ratio after reductions as of 04/30/2008: 1.17%

FID MGD INC PORT
Management fee: 0.55%

FID TOTAL BOND
Management fee: 0.32%
Expense Ratio as of 11/20/2008: 0.45%
Expense Ratio after Reductions as of 02/29/2008: 0.45%
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Old 08-05-2008, 02:39 PM   #9
Confused about dryer sheets
 
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Really (about the Boggleheads vs. Money Magazine)... I've kinda been talking to my friend's dad, and he keeps telling me to pick up Money Magazine and Smart Money and to start watching CNBC.
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Old 08-05-2008, 02:40 PM   #10
Confused about dryer sheets
 
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Do you have a taxable account right now as well or will that not be set up until you drop to 4%?

Oh, and the answer to that is... I don't know? I have a few checking accounts, a savings account, and that 401k...
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Old 08-06-2008, 01:37 PM   #11
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Originally Posted by cumptrnrd View Post
Really (about the Boggleheads vs. Money Magazine)... I've kinda been talking to my friend's dad, and he keeps telling me to pick up Money Magazine and Smart Money and to start watching CNBC.
I hope you forgot to put the "winkies" on the end of that statment

You will rarely get good investment advice from any of those venues. It is NOT in their best interest to advise you on how to wisely invest your hard earned money. I highly recommend reading from the list I posted above before making decisions or changes. Many of those books should be available in your local library.

DD
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Old 08-09-2008, 05:05 PM   #12
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Unless you have an asset allocation you know you want more than what's in 2050, I'd stay with the Freedom fund. That's the easy choice.

For my AA I prefer even splits between domestic/foreign, growth/value, large/small, plus energy, emerging markets, and real estate. No bonds. Everyone is different. I'd definitely want more foreign than 10%, though the US could outperform for the next few years (or not).
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