Author Topic: What are my best options in my 401k?  (Read 1094 times)

Dagon

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What are my best options in my 401k?
« on: May 05, 2013, 04:04:01 pm »
I have 31 options, and no low cost index funds.  I don't get an employer match or anything, but after doing some reading it seems maxing out my tax deferred 401k is still my best option.  I am also maxing out my ROTH IRA.

TICKER | EXP RATIO | NAME

Blended (12 options)
FHFAX | 1%+ | FA FREEDOM 2005-2055 A
Bonds
ADFAX | .86 | AM CENT DIV BOND A
FVIAX | .77 | FA GOV INCOME A
OHYAX | 1.11 | JPM HIGH YIELD A
LALDX | .59 | LD ABT SH DTN INC A
Short-Term
FDAXX | .7 | FID PRIME FUND
Stock Large Cap
PNEAX | 1.06 | ALZGI NFJ DIV VAL A
FNIAX | 1.01 | FA NEW INSIGHTS A
OIEIX | 1.05 | JPM EQUITY INCOME A
LDFVX | 1.09 | LD ABT FNDMNTL EQ A
Stock Mid Cap
EAASX | 1.25 | EV ATL CAP SMID-CP A
FDXAX | .76 | NUVEEN MDCP INDEX A
VETAX | 1.06 | VICTORY ESTB VALUE A
Stock Small Cap
PCVAX | 1.19 | ALZGI NFJ SMCPVL A
FCAGX | 1.35 | FA SMALL CAP GR A
PSSMX | .76 | PIF SMCP S&P 600 R3
International
FAIDX | 1.34 | FA INTL DISCOVERY A
FWAFX | 1.43 | FA WORLDWIDE A
GTDDX | 1.45 | INVS DEVELOP MKTS A
Income
JMNAX | 1.52 | JPM RSCH MKT NTRL A

I am currently split 25% 4 ways to diversify:
OIEIX (large cap)
FDXAX (mid cap)
VETAX (mid cap)
PCVAX (small cap)

However I'm thinking of just doing 50% FDXAX index fund and 50% PSSMX index fund.  But both of these have 12b-1 fees.  Is that a good idea?  Thoughts?

GreenGuava

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Re: What are my best options in my 401k?
« Reply #1 on: May 05, 2013, 04:52:50 pm »
What I think you're really asking is for help with your asset allocation, for which you haven't given us enough information.  We could pick what the best fund(s) are, if this were the entire universe of mutual funds you could choose for all your investments, and had to plan accordingly.

But both of these have 12b-1 fees.  Is that a good idea?  Thoughts?

The total fee/ER matters;  who it goes to doesn't really affect you for purposes of planning.

Approximately how much is in this 401(k), and how much do you anticipate adding to it in 2013?

How much is in your Roth[1] IRA, and how much do you anticipate adding to it in 2013?  Furthermore, where is it held?

Do you have any other tax-advantaged accounts (old 401(k)s, a rollover IRA, etc), and if so, balance/location?

It is my suggestion that you treat all of your tax-advantaged accounts as one retirement portfolio, picking the least bad in your 401(k) and making up for it elsewhere when possible.  For example, my employer's plan has terrible international fund selections, so I hold more of those in my Vanguard account than I would if that were my only investment, and have no international exposure in my employer plan (due to the domestic and bond choices being better there).

Reasonable people disagree about whether or not to treat taxable investments intended for retirement as part of the same portfolio.  Do you intend to do so, and if so, do you have any such investments, and where and what are they?



[1] Minor nitpick:  it's named after a person and is not an acronym;  Roth not ROTH.  Not a big deal, unless you're Sen. Roth I suppose.
I could settle for a less than ordinary life, but I feel like I was meant for something better.

Dagon

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Re: What are my best options in my 401k?
« Reply #2 on: May 05, 2013, 05:05:38 pm »
I'm 22 with a very high risk tolerance.  12k in both the Roth IRA and the 401k.  And I plan on contributing the maximum to both.  $5.5 and $17.5.  Everything with Fidelity.  The Roth IRA is in some total market index fund.  When the time comes I will buy bonds in the Roth IRA.  My question is mostly what are the "least bad" options in my 401k? 

Edit: I don't have any other taxable investments.  Just $5000 emergency stash.
« Last Edit: May 05, 2013, 05:07:19 pm by Dagon »

GreenGuava

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Re: What are my best options in my 401k?
« Reply #3 on: May 05, 2013, 05:37:43 pm »
For domestic stocks, I'd suggest holding, in about a 3:2 ratio, FDXAX : PSSMX.  Hold, in your Roth IRA, in about a 4:1 ratio to the total of these two, an S&P 500 index.  This will approximate the total market.  Fill the rest of your domestic stock allocation with total stock market in your Roth IRA.

ADFAX and FVIAX are the better bond choices.   I'd avoid OHYAX entirely ("high yield bond" is a euphemism for "junk bond").  LALDX is short-term, which I think is a bad idea for bonds you intend to hold long term (note: longer term bonds will experience some dip in NAV when rates rise, which I expect them to in the next quarter-dozen years or so.  However, a combination of maturing bonds and re-investment of dividends should mitigate some of this, and the purpose of bonds in your portfolio isn't really the return they give anyway).

FDAXX is a money market account and isn't worth holding in your 401(k) at your age and risk tolerance.

Each of the large-cap options, despite claiming to not be attempting to do this, has been doing a good job of following the S&P 500 index.  If you need large caps in your 401(k) for some reason, pick one. 

I'd avoid the international funds in this account;  their ERs are high, even for your 401(k).  I'm sure Fidelity has a good international fund you can use in your Roth IRA.

I am currently split 25% 4 ways to diversify:

It's far better to determine what you want your asset allocation to be and figure out what you can use to fill that;  there was a big overlap in the funds you picked.  Is there a particular reason you wanted to have large-caps as only 25% of your allocation and mid-caps at 50%?  Either way, diversity is achieved by the underlying assets, not the mutual funds through which you hold those assets.

However I'm thinking of just doing 50% FDXAX index fund and 50% PSSMX index fund.

If you go with this, coupled with your Roth IRA, you end up with 100% stocks, tilted heavily towards mid- and small- caps.  Is there a particular reason you want this?
I could settle for a less than ordinary life, but I feel like I was meant for something better.

Dagon

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Re: What are my best options in my 401k?
« Reply #4 on: May 05, 2013, 06:19:30 pm »
No particular reason, I wasn't thinking about asset allocation.  I'm ok with 100% stock though.  I also won't be able to do a 4:1 ration of S&P500 to the total of those two index funds, since my Roth IRA and 401k are the same size. 

Perhaps, would a 6:3:2 ratio in my 401k of OIEIX:FDXAX:PSSMX approximate the total market in my 401k, and then leave my Roth IRA as a mix of Total Market Index / International index?

GreenGuava

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Re: What are my best options in my 401k?
« Reply #5 on: May 05, 2013, 10:30:27 pm »
Perhaps, would a 6:3:2 ratio in my 401k of OIEIX:FDXAX:PSSMX approximate the total market in my 401k, and then leave my Roth IRA as a mix of Total Market Index / International index?

That works;  be aware that you're still tilted towards small and mid caps.  However, some people do that on purpose. 
I could settle for a less than ordinary life, but I feel like I was meant for something better.