401k/investing Gurus

[finite automaton]

When I first started my 401k about 4-5 months ago I just picked the funds that sounded good. Obviously I know now that was a terrible thing to do. A month or so ago I used some reasoning to pick 4 funds, 1 low risk, 1 med low risk, 1 med high risk, and 1 high risk, they are:

Lifecycle 2040 Fund
Bond Market Index Fund
S&P 500 Index Fund
Stable Value Fund

In different threads I've seen people recommend throwing everything into an S&P500 fund, but I don't feel comfortable doing that.

There are my other options in addition to what is listed above...

Balanced Index Fund (60% S&P 40% Bonds)
International Index Fund
Russell 2000 Index
Large Companies Value Fund
Large Companies Core Fund
Large Companies Growth Fund
Large Co. International Fund
Small/Mid Co Value Fund
Small/Mid Co Growth Fund
Science and Technology Fund

I could give you more info on the funds if necessary, but I don't think it's important here. I should be able to get the basic idea of what I need to do without providing that information.

So, WWATOTD?

Edit: I am 23.

 

[NoCreativity]

You are young and have a long way until retirement, same with me. That means your portfolio should be heavy in stocks since you have a long time to ride out rough patches in the market. Personally I have 90% in stock funds.

Without knowing specifics on the lifecycle fund I can only guess that it is some combination of the other funds you have available (e.g. 80/20 mix of stock funds/bond funds) so there really is no reason to split money between that and the other funds like you have done. Either put everything into the lifecycle, or come up with your own mix of funds if you aren't happy with the funds or the mix that the lifecycle offers.

Of your list of other possible funds I would definitely go with the International index. For my 401k, the international and the small cap fund I have access to have done very well over the last few years.

Look over some the the articles here. If your company offers retirement classes/planning take advantage of that too.

 

[darkxshade]

Put it all on Lehman and roll the dice

 

[Special K]

Short answer: go here:

Boglehead's Fourm

It's the best place on the net for long-term buy and hold investment advice.

Long answer:

What are the ticker symbols for each of your funds? Knowing that would help quite a bit.

 

[Fritzo]

Actually, with the expected world economic slowdown predicted for next year, I'd stay away from global and international investments. If you diversify into like 8-10 areas, you should be pretty safe. After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

 

[Special K]

Originally posted by: Fritzo
After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

This is a bad idea. Past performance does not guarantee future results. In many cases, the top performing mutual funds one year end up being the worst performing funds in future years.

 

[vi edit]

One very important item to not overlook - expense ratios. How much are the funds costing you?

Under half a percent, and that's not too bad. Start getting into 1% or more and you should consider avoiding.

 

[finite automaton]

Originally posted by: NoCreativity
You are young and have a long way until retirement, same with me. That means your portfolio should be heavy in stocks since you have a long time to ride out rough patches in the market. Personally I have 90% in stock funds.

Without knowing specifics on the lifecycle fund I can only guess that it is some combination of the other funds you have available (e.g. 80/20 mix of stock funds/bond funds) so there really is no reason to split money between that and the other funds like you have done. Either put everything into the lifecycle, or come up with your own mix of funds if you aren't happy with the funds or the mix that the lifecycle offers.

Of your list of other possible funds I would definitely go with the International index. For my 401k, the international and the small cap fund I have access to have done very well over the last few years.

Look over some the the articles here. If your company offers retirement classes/planning take advantage of that too.

The Life cycle is...
Large Cap Stocks: 49.50%
Small and Mid Cap Stocks: 10.45%
International Stocks: 24.5%
Real Estate (REITS): 6.75%
Nominal Bonds: 8.85%

 

[finite automaton]

Originally posted by: vi edit
One very important item to not overlook - expense ratios. How much are the funds costing you?

Under half a percent, and that's not too bad. Start getting into 1% or more and you should consider avoiding.

I think my company pays for the fees (there are none listed in the data sheets)

 

[finite automaton]

Originally posted by: Special K
Short answer: go here:

Boglehead's Fourm

It's the best place on the net for long-term buy and hold investment advice.

Long answer:

What are the ticker symbols for each of your funds? Knowing that would help quite a bit.

I don't think they have ticker symbols...

 

[Special K]

Originally posted by: finite automaton

Originally posted by: Special K
Short answer: go here:

Boglehead's Fourm

It's the best place on the net for long-term buy and hold investment advice.

Long answer:

What are the ticker symbols for each of your funds? Knowing that would help quite a bit.

I don't think they have ticker symbols...

That is very odd. Who is your 401k provider?

 

[ivan2]

since u started late i would suggest putting majority of them into bond until this shit storm passed.

 

[finite automaton]

Originally posted by: Special K

Originally posted by: finite automaton

Originally posted by: Special K
Short answer: go here:

Boglehead's Fourm

It's the best place on the net for long-term buy and hold investment advice.

Long answer:

What are the ticker symbols for each of your funds? Knowing that would help quite a bit.

I don't think they have ticker symbols...

That is very odd. Who is your 401k provider?

CitiStreet

Edit: I'm trying to find the other info you asked for

 

[boomerang]

Talk to your friends and see if anyone has an investment adviser they would recommend that you can work with on a fee only basis. You pay him or her strictly for their time.

It sounds like you have a plan through your employer and as such have a family of funds you can pick from. This is a perfect scenario for this. The adviser has no stake in what they recommend you invest in. All they can give you is advice.

They will have you fill out a questionnaire to assess your risk tolerance. They will advise from there. There is nothing wrong with paying people for their knowledge. You may be surprised how affordable it is.

 

[dullard]

Randomly picking funds at the beginning is just fine. It'll have a negligible effect on your retirement. And heck, you can quite possibly do better that way (no one can ever tell the future). I would not say it was "a terrible thing to do". But, there are better ways to do it.

1) Keep your fund costs low. That is why index funds are good. Just keep an eye out for any fund with high fees (much more than 1%).

2) Keep a diverse mix. You want some large, some small, some growth, some value, some domestic, some international, some stock, some bond.

With that list, I'd personally start with:
20% large value
20% large growth
15% small/mid value
15% small/mid growth
15% international
15% bond.

Then move 5% here or there to meet your personal level of risk. For example, if you are more willing to be risky, move 5% from that bond (total 10%) and into the small growth (total 20%).

Before you make these purchases, check here and make certain your choice is filling all the 9 boxes in the resulting graph square (it'll make sense when you fill in the information). Each of the 9 boxes should be well represented with whatever mix you choose. If one box is overweight or one is lacking, you should adjust accordingly. This tool is very powerful.

 

[finite automaton]

Originally posted by: dullard
Randomly picking funds at the beginning is just fine. It'll have a negligible effect on your retirement. And heck, you can quite possibly do better that way (no one can ever tell the future). I would not say it was "a terrible thing to do". But, there are better ways to do it.

1) Keep your fund costs low. That is why index funds are good. Just keep an eye out for any fund with high fees (much more than 1%).

2) Keep a diverse mix. You want some large, some small, some growth, some value, some domestic, some international, some stock, some bond.

With that list, I'd personally start with:
20% large value
20% large growth
15% small/mid value
15% small/mid growth
15% international
15% bond.

Then move 5% here or there to meet your personal level of risk. For example, if you are more willing to be risky, move 5% from that bond (total 10%) and into the small growth (total 20%).

Before you make these purchases, check here and make certain your choice is filling all the 9 boxes in the resulting graph square (it'll make sense when you fill in the information). Each of the 9 boxes should be well represented with whatever mix you choose. If one box is overweight or one is lacking, you should adjust accordingly. This tool is very powerful.

Thanks Dullard, I was hoping you'd chime in. I really don't think they have ticker symbols, I'll look deeper when I get home (leaving work now).

Thanks.

 

[darkxshade]

Originally posted by: finite automaton

Originally posted by: Special K
Short answer: go here:

Boglehead's Fourm

It's the best place on the net for long-term buy and hold investment advice.

Long answer:

What are the ticker symbols for each of your funds? Knowing that would help quite a bit.

I don't think they have ticker symbols...

They do, just need to know who's issuing... Bond Market Index Fund for example sounds too generic is it:

Dreyfus Bond market Index Fund (ticker: DBIRX)

or

Vanguard Total Bond Market Index Fund (ticker: VBMFX)

 

[Yossarian]

Assuming you're in your 20's, I would keep it simple and allocate like this--

65% S&P 500 Index Fund
15% International Index Fund
20% Bond Market Index Fund

You would also be fine just putting everything into the Lifecycle fund because it has a good asset allocation.

Indexes are the best because they have the lowest expense ratios. Managed funds have higher expenses and historically don't perform better than the indexes over the long term, which is the time period you should be looking at when it comes to your 401k.

You should have some bonds, and some international. Everything else can go in the S&P. If you want more diversification you can put some into Russell instead of S&P. Then every year rebalance your portfolio, selling off the higher-performing funds and putting that money into the lower performers. That way you're guaranteed to sell high and buy low. 401k's tax sheltered investments are nice in that there are no fees and no capital gains taxes when you move your money around.

As others recommended, read the bogleheads forum, and check out the book list they have there.

 

[Yossarian]

Originally posted by: ivan2
since u started late i would suggest putting majority of them into bond until this shit storm passed.

This is horrible advice. There will always be upturns and downturns in the market. No one can predict the future, but historically stocks have always outperformed bonds over the long term. Now the stock market sucks... guess what, that means that now is a fantastic time for a new investor to get into the market. Prices are low so you'll be able to buy more shares. Then when the market recovers, whether it be in 2 years, 5, or 10, you will be much better off than if you had just parked your money in bonds.

401k is a 40+ year investment. You don't even need to follow what's going on the market. Day to day fluctuations are noise. As long as you have a good asset allocation and rebalance regularly you will do fine.

 

[PaNsyBoy8]

Originally posted by: ivan2
since u started late i would suggest putting majority of them into bond until this shit storm passed.

i'm not sure if i'd agree with this, this might be a good time to buy since the prices for tons of stocks are low. we're thinking long term here, better to buy when the market sucks.

 

[Special K]

Originally posted by: Yossarian

Originally posted by: ivan2
since u started late i would suggest putting majority of them into bond until this shit storm passed.

This is horrible advice. There will always be upturns and downturns in the market. No one can predict the future, but historically stocks have always outperformed bonds over the long term. Now the stock market sucks... guess what, that means that now is a fantastic time for a new investor to get into the market. Prices are low so you'll be able to buy more shares. Then when the market recovers, whether it be in 2 years, 5, or 10, you will be much better off than if you had just parked your money in bonds.

401k is a 40+ year investment. You don't even need to follow what's going on the market. Day to day fluctuations are noise. As long as you have a good asset allocation and rebalance regularly you will do fine.

Agreed. Timing the market is futile. No one has been able to do it consistently for decades. Remember that you actually need to make 2 correct guesses each time - you need to know when the market will peak so you know when to sell, and you also need to know when the market will bottom so you know when to buy.

You are better off buying and holding.

 

[Fritzo]

Originally posted by: Special K

Originally posted by: Fritzo
After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

This is a bad idea. Past performance does not guarantee future results. In many cases, the top performing mutual funds one year end up being the worst performing funds in future years.

Really? Wow...how did I make all this money over the last 10 years?

I better call my broker so I can give it back I was on track for a million $ at 63 too.

 

[Special K]

Originally posted by: Fritzo

Originally posted by: Special K

Originally posted by: Fritzo
After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

This is a bad idea. Past performance does not guarantee future results. In many cases, the top performing mutual funds one year end up being the worst performing funds in future years.

Really? Wow...how did I make all this money over the last 10 years?

I better call my broker so I can give it back I was on track for a million $ at 63 too.

Please share the system you are using to identify winning mutual funds in advance.

Also, what exactly was your return? How did you calculate it? How did your portfolio perform relative to an appropriate benchmark index? How much are you paying the broker?

Perhaps your returns would have been even higher if you weren't trying to chase the latest "hot" funds.

 

[Fritzo]

Originally posted by: Special K

Originally posted by: Fritzo

Originally posted by: Special K

Originally posted by: Fritzo
After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

This is a bad idea. Past performance does not guarantee future results. In many cases, the top performing mutual funds one year end up being the worst performing funds in future years.

Really? Wow...how did I make all this money over the last 10 years?

I better call my broker so I can give it back I was on track for a million $ at 63 too.

Please share the system you are using to identify winning mutual funds in advance.

Also, what exactly was your return? How did you calculate it? How did your portfolio perform relative to an appropriate benchmark index? How much are you paying the broker?

Perhaps your returns would have been even higher if you weren't trying to chase the latest "hot" funds.

God I hate smug people. My broker is provided by my company to handle 401K assets, so there's no fees to speak of. I review my holdings on an annual basis, and allocate as needed. I'm diversified in no less than 5 areas, and sometimes up to 10 areas. During the rough times at the beginning of the year I put most of my money in Index funds and low load mutual funds for safe keeping, and a small amount into bonds. At the end of this year or early next year I'll probably move more into the bonds market if the economy picks up.

Our Goldman Sachs funds performed 8% over market this year, and nearly 20% over market last year. No, you shouldn't be moving your holdings around monthly to "ride the market", but an annual revamping is a great idea imo.

 

[Special K]

Originally posted by: Fritzo

Originally posted by: Special K

Originally posted by: Fritzo

Originally posted by: Special K

Originally posted by: Fritzo
After a year, see which funds had a decent gain and transfer funds from poorly performing funds to the higher performance ones.

This is a bad idea. Past performance does not guarantee future results. In many cases, the top performing mutual funds one year end up being the worst performing funds in future years.

Really? Wow...how did I make all this money over the last 10 years?

I better call my broker so I can give it back I was on track for a million $ at 63 too.

Please share the system you are using to identify winning mutual funds in advance.

Also, what exactly was your return? How did you calculate it? How did your portfolio perform relative to an appropriate benchmark index? How much are you paying the broker?

Perhaps your returns would have been even higher if you weren't trying to chase the latest "hot" funds.

God I hate smug people. My broker is provided by my company to handle 401K assets, so there's no fees to speak of. I review my holdings on an annual basis, and allocate as needed. I'm diversified in no less than 5 areas, and sometimes up to 10 areas. During the rough times at the beginning of the year I put most of my money in Index funds and low load mutual funds for safe keeping, and a small amount into bonds. At the end of this year or early next year I'll probably move more into the bonds market if the economy picks up.

Our Goldman Sachs funds performed 8% over market this year, and nearly 20% over market last year. No, you shouldn't be moving your holdings around monthly to "ride the market", but an annual revamping is a great idea imo.

What funds were they (The GS ones)?