Which of these 401(K) choices would be your pick?

[LakeTravis]

In January, my company will be switching 401(K) from Valic to another company.

Below are the choices - I would consider myself a moderate-risk investor seeking above average returns.

Which of these would be your pick?

Vanguard Prime Money Market InvMoney Market
Vanguard Short-Term Federal Adm
Vanguard Interm-Term Treasury Adm
Vanguard Inflation-Protected Secs Adm
Vanguard Interm-Term Bond Index Signal
PIMCO High Yield Instl
Vanguard Equity-Income Adm
Vanguard 500 Index Signal
American Funds AMCAP R6
Vanguard Selected Value Inv
Vanguard Mid Cap Index Signal
PRIMECAP Odyssey Aggressive Growth
DFA US Targeted Value I
Vanguard Small Cap Index Signal
Vanguard Small Cap Growth Index Adm
American Funds EuroPacific Gr R6
Vanguard Total Intl Stock Index Signal
Oppenheimer Developing Markets I
Vanguard Precious Metals and Mining Inv
PIMCO Commodity Real Ret Strat Instl
Vanguard REIT Index Signal
Vanguard Target Retirement Income Inv
Vanguard Target Retirement 2015 Inv
Vanguard Target Retirement 2020 Inv
Vanguard Target Retirement 2025 Inv
Vanguard Target Retirement 2030 Inv
Vanguard Target Retirement 2035 Inv
Vanguard Target Retirement 2040 Inv
Vanguard Target Retirement 2045 Inv
Vanguard Target Retirement 2050 Inv
Vanguard Target Retirement 2055 Inv
Vanguard Target Retirement 2060 Inv

 

[Animorph]

I'd go with T.R. 2060 with a little REIT, small cap for spice. Move to earlier dates to add in some bonds, whatever those are...

 

[photoguy]

I think you need to figure out an overall asset allocation first and then piece together how your 401k can help fill the buckets.

Personally, I usually pick the funds that are most tax inefficient (throw off a lot of dividends, capital gains, etc.) with the lowest expense ratios (for that category).

 

[ERD50]

I'll give a very incomplete, but maybe helpful, answer - my daughter's boyfriend asked a similar question of me regarding his 401K options on his new job (a boyfriend with a job, and planning for the future - yes, we like him!).

I was ready to give the generic 'pick an AA, put it a mix of broad stock market index, and broad bond fund index, and let it roll' answer. But then I looked into those target funds. I never looked closely before, but I liked what I saw. I don't recall the details, so check for yourself, but from what I remember, the expenses were really low. That kinda makes sense, the average person going into a target fund isn't going to be moving their money around - they should be 'cheap' to service.

And they keep a pretty aggressive stock mix all through the early years, and only later do they start moving more to bonds. I had expected a straight age formula. Give them consideration.

-ERD50

 

[LakeTravis]

Thanks for the feedback. I realize I'm asking a broad question that doesn't necessarily accomodate specifics like AA and such, but I was just wondering what others might like out of the choices offered.

I'm reluctant to invest in any sort of bond fund right now, strictly because my understanding is bonds are destined to fall in price when rates eventually go up.

I'm also puzzled about internationals, which seem to have been providing terrible performance. Perhaps that's why they should be bought?

ERD50, I agree about the target funds - I have been gravitating to those lately because the ER's are pretty low and they seem to be pretty solid.

I suppose that in a sense I'm lucky to have to do this because my after-tax investments are in Wellington (50%), Wellesley (35%), and REIT (15%) and had those been choices in this 401(K) offering, I probably would have taken the lazy approach and mirrored what I already have.

 

[nun]

I suppose that in a sense I'm lucky to have to do this because my after-tax investments are in Wellington (50%), Wellesley (35%), and REIT (15%) and had those been choices in this 401(K) offering, I probably would have taken the lazy approach and mirrored what I already have.

FYI your after tax AA is not very tax efficient. The usual place to hold bond and REIT investments is in tax deferred accounts. You should consider arranging you funds to emphasize bonds and REITS in your tax deferred retirement accounts and equity index funds in your after tax accounts.

 

[timeasterday]

What are the expense ratios? That's what I would look at first.

 

[LakeTravis]

FYI your after tax AA is not very tax efficient. The usual place to hold bond and REIT investments is in tax deferred accounts. You should consider arranging you funds to emphasize bonds and REITS in your tax deferred retirement accounts and equity index funds in your after tax accounts.

Thanks for this. I'll definitely follow your advice.

 

[LakeTravis]

What are the expense ratios? That's what I would look at first.

I should have posted them.

The Vanguard choices are relatively low (.10 - .20) while the non-Vanguard choices are noticeably higher (.3 - .9)