401(k) Asset Allocation Advice

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Adroit

Veteran XX
Hello friends. I'm finally setting up a 401(k) at work and I need help with asset allocation.

Here are is the current performance:
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I'm also planning on doing 4% into ROTH and 2% into traditional as the company matches 50% up to 6%...though next year it looks like they are variably matching contributions...not sure wtf that means. I'm 28 and obviously expect to continue up the ladder.

I understand you're supposed to be higher risk while your younger, outside of that I'm clueless about wtf any of the performance above is telling me.
 
Seriously don't worry about this shit too much. The best advice I can give is to invest in index funds. If you own any funds with relatively high maintenance fees, dump them for index funds if you can. Don't listen to that take larger risks when you are younger bullshit. You at least have a 401k so you are doing something correct.
 
if you want higher risk/return look at the historics on small-caps and internationals

balance them out with a little fixed-income and large cap
 
if your company matches up to 6%, then contribute at least 6%.

My company used to match 5% (100%), but they dumped that and don't match shit now. it sucks. Also, I probably don't put as much as I should be in my 401k at all :(
 
Yeah max the match, do more risk young, and when shit drops, don't change a thing. In fact don't even look at it other than to Pl make sure performance is at an acceptable level relative to other funds. Follow managers, not the funds themselves. Fuck fees.
 
Please clarify on the ROTH / Traditional. Why are you splitting this up? The ROTH is a better option. Are you limited to these mutual funds? It's not a very good selection. I definitely wouldn't go over the max. I mean those are really shitty funds.

You should complement your 401k with a Roth IRA on the side if your income allows it. If you are living at home or something now I would look to be putting away 15-20% a year as long as you can afford it. (not in these mutual funds, though)

The only affordable funds in that selection are the 3 index funds. So you have the large cap,mid cap, small cap. You could do an equal mix of all 3 and that will be fine.
 
I was waiting for you Rayn! I was pondering full ROTH, not sure why I went 2%/4%...I guess that's my definition of diversifying.

And yeah, this is all that is offered under my plan. Skibbi mentioned something about putting 7.5% each into the PIMCO's and doing the remaining 85% into the index funds. This was over two years ago though in an old thread.

Not quite ready to add a Roth IRA, still paying a lot towards school loans.

40% Large, 30% Mid, 30% Small?
 
The general "risk high while young" thing is based on the assumption the market is volatile and it will make more money when you are just starting out and the 401K account has less money in it, and then move to safer investing once you are older and the account has a healthy balance.

Of course I was around my mid-20s when the housing bubble popped, and thanks to that "high risk while young" advice my 401K balance tanked roughly 40% overnight. It was bad, but I know a lot of people had it worse.
 
paulmezick said:
Seriously don't worry about this shit too much. The best advice I can give is to invest in index funds. If you own any funds with relatively high maintenance fees, dump them for index funds if you can. Don't listen to that take larger risks when you are younger bullshit. You at least have a 401k so you are doing something correct.
Click to expand...

Good advice.

Vanguard admiral share index funds have the lowest fees I have found yet. You can make your regular mutual fund shares 'admiral' to further reduce fees by placing more than 10k in a specific mutual fund and then converting them to admiral shares.
 
If you want to learn a lot I suggest reading Personal Finance as well as Bogleheads • Index page

All your fund options are pretty shitty in one of the most important areas, expense ratios. You need to approach your asset allocation across all your retirement funds, not just the 401k.

How old are you? In my case being in my late 20s my asset allocation is 60% domestic stock, 30% international and 10% fixed income. Looking at your options I would probably put my 401k funds (up to your company match) into that S&P 500 index and get international and bond exposure in your IRA portfolio.

Not sure how large your company is but you should really petition for better fund selections. Almost a 1% ER on those target funds is robbery, the same fund at Vanguard is .18%.
 
morningstar.com is a good site to check. Sign up for the free trial and research your topics/funds.

Some of your funds have crazy expenses
 
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