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401k Investment Distribution - 32 years old
11-02-2017, 02:33 PM
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#1
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Dryer sheet wannabe
Join Date: Nov 2017
Posts: 22
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401k Investment Distribution - 32 years old
This question is spurned from another thread and I hope this is the right spot to post.
I was using a managed 401k account up until today. The distribution of funds was as follows:
5% - Stable Income - Active
2% - Fixed Income - Active
1% - Real Assets
17% - US All Cap Equity Stocks - Active
35% - US All Cap Equity Stocks - Index
34% - International Equity Stocks - Index
6% - Company Stock
Curious if this is an appropriate distribution for my age. We also have a target date funds available at our disposal but I figured that the above distribution would remain relevant until at least age 40.
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11-02-2017, 02:49 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jul 2002
Posts: 1,587
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Works out to be 93/7 stock/income portfolio. Quite aggressive but I would not consider it unreasonable for a 32 year old. Depends on your risk tolerance.
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11-02-2017, 02:52 PM
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#3
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Dryer sheet wannabe
Join Date: Nov 2017
Posts: 22
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Quote:
Originally Posted by RE2Boys
Works out to be 93/7 stock/income portfolio. Quite aggressive but I would not consider it unreasonable for a 32 year old. Depends on your risk tolerance.
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I targeted a moderate aggressive path when it was being managed. If you were to scale it back any, what distribution would you move?
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11-02-2017, 03:13 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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I think it's OK. What is the benchmark for the all cap index fund?
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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11-02-2017, 03:20 PM
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#5
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Dryer sheet wannabe
Join Date: Nov 2017
Posts: 22
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Quote:
Originally Posted by jazz4cash
I think it's OK. What is the benchmark for the all cap index fund?
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Russell 3000 TR
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11-06-2017, 05:20 PM
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#6
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Recycles dryer sheets
Join Date: Nov 2017
Posts: 75
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Quote:
Originally Posted by MSUIndy
This question is spurned from another thread and I hope this is the right spot to post.
I was using a managed 401k account up until today. The distribution of funds was as follows:
5% - Stable Income - Active
2% - Fixed Income - Active
1% - Real Assets
17% - US All Cap Equity Stocks - Active
35% - US All Cap Equity Stocks - Index
34% - International Equity Stocks - Index
6% - Company Stock
Curious if this is an appropriate distribution for my age. We also have a target date funds available at our disposal but I figured that the above distribution would remain relevant until at least age 40.
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IMHO, at your age I would be 100% in equity stocks with a 60/40 split U.S./International. Get out of company stock unless they offer something like an Employee Savings Plan that saves you 10% or so. Diversify as much as possible, holding too much of one position increases risk. Just my thoughts YMMV.
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11-06-2017, 05:25 PM
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#7
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gone traveling
Join Date: Dec 2015
Location: Berkeley, Denver, CO, USA
Posts: 1,406
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MrBig1 has the best advice.
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11-06-2017, 06:21 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,374
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Quote:
Originally Posted by MSUIndy
...... Curious if this is an appropriate distribution for my age. We also have a target date funds available at our disposal but I figured that the above distribution would remain relevant until at least age 40.
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Fine for your age... though at your age I was more like 100/0.... good to 40 too. When I was in my mid 40s I started directing contributions and reinvestment of dividends into fixed income.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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11-06-2017, 07:12 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by pb4uski
Fine for your age... though at your age I was more like 100/0.... good to 40 too. When I was in my mid 40s I started directing contributions and reinvestment of dividends into fixed income.
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At that age I was 0/100. (I had a couple thousand in a bank IRA.) It worked for me. Eventually. After I got my allocation moved around and the savings up a bit.
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11-07-2017, 07:52 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2004
Location: St. Louis
Posts: 2,179
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Quote:
Originally Posted by MSUIndy
This question is spurned from another thread and I hope this is the right spot to post.
I was using a managed 401k account up until today. The distribution of funds was as follows:
5% - Stable Income - Active
2% - Fixed Income - Active
1% - Real Assets
17% - US All Cap Equity Stocks - Active
35% - US All Cap Equity Stocks - Index
34% - International Equity Stocks - Index
6% - Company Stock
Curious if this is an appropriate distribution for my age. We also have a target date funds available at our disposal but I figured that the above distribution would remain relevant until at least age 40.
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I would first check the expense ratios. Since it's Fido, I would assume it's somewhat reasonable. But I would start by making sure they are all 'decent' (Index maybe 0.15% or less, active at most 0.5% or less....int'l perhaps 0.9% or less) Assuming that is the case, I would be ok, but you also need to include any taxable investments and other investments outside of this. Don't look at it in a vacuum, but include any other allocations in other accounts. That way, with 401ks, you can pick the "least smelly" option (i.e. lowest expense ratios, which inside 401ks are often still relatively high....although hopefully Fidelity has some decent ones in your plan).
Typically, in my past when I worked for my previous employer, the international options were 'relatively reasonable' (i.e. expense ratios about 1.5% total), and weren't THAT much higher than many int'l options in my taxable and other accounts. However, the 401k domestic funds were all bloated at around 0.8%-1.5%! (and those were the indexes!) So, my best choice was to put my 401k mostly in international funds, since those would have high expense ratios regardless of being in a 401k or taxable account. Then, in my taxable, I had more exposure to various domestic funds/indexes/fixed income/etc, which had much lower expense ratios than the options in my 401k account. I also had a decent stable value fund yielding about 2%-2.5%( this was about 5 years ago, so that was pretty fair back then), so I also had a few funds in that. Often (but always check) stable value funds have better yields in a 401k plan than your cash options in a taxable account.
__________________
Dryer sheets Schmyer sheets
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11-07-2017, 08:26 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,705
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Quote:
Originally Posted by MSUIndy
This question is spurned from another thread and I hope this is the right spot to post.
I was using a managed 401k account up until today. The distribution of funds was as follows:
5% - Stable Income - Active
2% - Fixed Income - Active
1% - Real Assets
17% - US All Cap Equity Stocks - Active
35% - US All Cap Equity Stocks - Index
34% - International Equity Stocks - Index
6% - Company Stock
Curious if this is an appropriate distribution for my age. We also have a target date funds available at our disposal but I figured that the above distribution would remain relevant until at least age 40.
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umm in a retirement account until retired, I'd be:
100% - US All Cap Equity Stocks - Index
or:
65% - US All Cap Equity Stocks - Index
35% - International Equity Stocks - Index
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11-07-2017, 08:35 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Posts: 1,049
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Good advice above. I’d get out of fixed income. Look at expense ratios.
I’m 42, set up 50/50 domestic/international. Domestic is 2/3 s&p 500 1/3 small and mid cap.
Monthly contributions go into MM and I “rebalance” using the contributions to balance my holdings.
International was pretty bad last year, but the contributions paid off nicely this year.
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11-07-2017, 04:48 PM
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#13
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Dryer sheet wannabe
Join Date: Nov 2017
Posts: 22
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Quote:
Originally Posted by MooreBonds
I would first check the expense ratios. Since it's Fido, I would assume it's somewhat reasonable. But I would start by making sure they are all 'decent' (Index maybe 0.15% or less, active at most 0.5% or less....int'l perhaps 0.9% or less) Assuming that is the case, I would be ok, but you also need to include any taxable investments and other investments outside of this. Don't look at it in a vacuum, but include any other allocations in other accounts. That way, with 401ks, you can pick the "least smelly" option (i.e. lowest expense ratios, which inside 401ks are often still relatively high....although hopefully Fidelity has some decent ones in your plan).
Typically, in my past when I worked for my previous employer, the international options were 'relatively reasonable' (i.e. expense ratios about 1.5% total), and weren't THAT much higher than many int'l options in my taxable and other accounts. However, the 401k domestic funds were all bloated at around 0.8%-1.5%! (and those were the indexes!) So, my best choice was to put my 401k mostly in international funds, since those would have high expense ratios regardless of being in a 401k or taxable account. Then, in my taxable, I had more exposure to various domestic funds/indexes/fixed income/etc, which had much lower expense ratios than the options in my 401k account. I also had a decent stable value fund yielding about 2%-2.5%( this was about 5 years ago, so that was pretty fair back then), so I also had a few funds in that. Often (but always check) stable value funds have better yields in a 401k plan than your cash options in a taxable account.
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Here is the current breakdown of fees for my investments (% distrubtion):
Stable Income Active (5%) - 0.334%
Fixed Income Active (2%) - 0.396%
Real Assets (1%) - 0.209%
US All Cap Equity - Index (52%) - 0.066%
International Equity - Index (34%) - 0.127%
Company Stock (6%) - 0.039%
From the information I've gathered, it seems that the better distribution from now until say, 40, would be the following:
US All Cap Equity - Index (65%)
International Equity - Index (35%)
Sans the company stock, fees would be the lowest. Is this a "set-it-and-forget-it" until X age situation? I would guess that at some point I would need to start scaling back the risk level of my portfolio, right?
Thanks for all the information everyone and for helping me make sense of this whole investment process.
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11-07-2017, 06:37 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,705
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Set and reallocate (annually) as necessary to keep it at 65% US all cap index & 35% international index
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11-08-2017, 07:20 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Sep 2016
Location: Acworth
Posts: 1,214
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Quote:
Originally Posted by MSUIndy
Here is the current breakdown of fees for my investments (% distrubtion):
Stable Income Active (5%) - 0.334%
Fixed Income Active (2%) - 0.396%
Real Assets (1%) - 0.209%
US All Cap Equity - Index (52%) - 0.066%
International Equity - Index (34%) - 0.127%
Company Stock (6%) - 0.039%
From the information I've gathered, it seems that the better distribution from now until say, 40, would be the following:
US All Cap Equity - Index (65%)
International Equity - Index (35%)
Sans the company stock, fees would be the lowest. Is this a "set-it-and-forget-it" until X age situation? I would guess that at some point I would need to start scaling back the risk level of my portfolio, right?
Thanks for all the information everyone and for helping me make sense of this whole investment process.
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Index only definitely. Nothing wrong with all cap funds imo, though you *could* chase higher returns by setting some aside into small cap/emerging market/etc index funds as well if you have the risk appetite for it. Either way, I wouldn't consider using actively managed funds with higher fees for (generally) no better return.
As for "when to scale back", that really depends on when you plan on retiring imo and your comfort level with risk. I'm (hopefully) less than 10 years from retirement and don't plan on going less than ~98% equities until I'm within 3-4 years of retirement. Of course, planning on retiring in my late 40's means that if I take a hit due to my more aggressive investment style then I can likely just work 1-2 more years and still retire in my late 40's or at least very early 50's.
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11-08-2017, 07:51 AM
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#16
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Dryer sheet wannabe
Join Date: Nov 2017
Posts: 22
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Quote:
Originally Posted by exnavynuke
Index only definitely. Nothing wrong with all cap funds imo, though you *could* chase higher returns by setting some aside into small cap/emerging market/etc index funds as well if you have the risk appetite for it. Either way, I wouldn't consider using actively managed funds with higher fees for (generally) no better return.
As for "when to scale back", that really depends on when you plan on retiring imo and your comfort level with risk. I'm (hopefully) less than 10 years from retirement and don't plan on going less than ~98% equities until I'm within 3-4 years of retirement. Of course, planning on retiring in my late 40's means that if I take a hit due to my more aggressive investment style then I can likely just work 1-2 more years and still retire in my late 40's or at least very early 50's.
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I think retirement is at least 23 years away so I have quite some time before I reach that point. Picked 40 as a number since it's reasonably far enough from now and from retirement before I thought I might need to consider moving funds around.
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11-19-2017, 07:08 AM
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#17
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Full time employment: Posting here.
Join Date: Aug 2017
Location: claremont
Posts: 601
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Mr Big1... I agree 100% equity at that age. And again with the company stock. Ask the Enron folks what happens when you invest heavily where you work. Dabble if they subsidize it, but paycheck and nest egg in one spot is bad.
My only quibble, US is dropping as % of investable universe toward 30% vs ROW. So I would do 60 foreign/40 US.
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