How should I allocate my 401k?

[redkitty]

I have been reading the boards for a while, but am new to posting. I don't know much if anything about the market but I can see from reading the threads here, that many of you do. I figured, maybe I can get some insight and advice. I have a 401k with a balance of $80k. I am embarassed to admit that since I have always been quite conservative and afraid of the market, I have been allocated mostly in fixed income and the past year or two have moved about 60% to equity. I would like to reallocate my 401k the best possible way, but I honestly don't know enough about the funds available or which are good to invest in. I am 38 so I know I have a good 20-25 years of investing ahead of me before I need to touch this.

My options are:

Blackrock Lifepath Target funds 2015, 2020, 2025, 2030, 2035, 2040
BNY Mellon Aggregate Fund
Cap Guardian Emerg. Mkt Eq Fund
Wellington Growth Portfolio
DFA Small Cap Portfolio
CQ Int'l Eq Fund
Dodge & Cox Value Equity
Blackrock S&P500 Index
Blackrock MidCap Index Fund

I have been told that at my age I should be 100% stocks but I don't know given my choices if some are better than others. I have also been told I am too young to have any Fixed Income, and I agree, that has probably cost me so far.

Any advice as to which funds would be worth investing in? Thanks in advance!

[Deleted]

Blackrock Target 2035 100%

[redkitty]

Thank you, that's simple! I have another stupid question...do target funds reallocate automatically as they are getting closer to the target fund? Meaning I don't have to invest some in S&P 500 because it's already in there? As I said, I don't know anything about the market!

[The Virginian]

I don't do funds - but putting all your eggs in one basket is Not a good idea !

[buystoys]

Oct 17, 2012 15:33:43 GMT -5 redkitty said:

Thank you, that's simple! I have another stupid question...do target funds reallocate automatically as they are getting closer to the target fund? Meaning I don't have to invest some in S&P 500 because it's already in there? As I said, I don't know anything about the market!

They do, but I also wouldn't go 100% into a single fund. What are the expenses on each? That's also something to look at since the expenses can really hurt your growth.

[Ombud]

110-age=amount in equities

that said, and as to your questions on how to invest the 72% equities part:
1. Get a book on investing
2. Yes, target funds reallocate as they age
3. Have at least 3 low cost buckets: (1) the best [lowest cost] S&P index fund (2) a growth option (3) a higher dividend option
I'm not going to 'pick' them for you ~~ sort of along the line of give a man a fish, he eats for a day.... Teach him to fish, he eats. But I definitely have my personal preferences on your list

[redkitty]

Thank you for the responses.

Gross Expense ratios are:
Lifepath funds between .10 and .12%
BNY Mellon Aggregate Fund .05%
Cap Guardian Emerg. Mkt Eq Fund 1.10%
Wellington Growth Portfolio .46%
DFA Small Cap Portfolio .37%
CQ Int'l Eq Fund .64%
Dodge & Cox Value Equity .31%
Blackrock S&P500 Index .01%
Blackrock MidCap Index Fund .04%

How do I figure out which are dividend options?

[redkitty]

Right now I am allocated in:

Dodge & Cox 20%
S&P 500 20%
Midcap 20%
Fixed 40%

I know I shouldn't be in fixed at all, I am not sure of whether I should split the other 40% between the 3 others I am in or go with something else. S&P and Midcap have very low expense ratios, the others not so much.

[Deleted]

Red - Even at your age, having some Fixed Income is NOT a bad thing. The Key is WHAT fixed income you have.
If the Fixed Income is all tied to Bonds, then that will most likely become problematic a bit down the road (How long no one is really sure - Although more and more "PROs" are thinking and saying that Bonds are in a Bubble).
I personally have 4 Items that would be considered "Fixed" Income (they pay a Monthly Dividend) - KBWY - A REIT ETF -- JNK -- A Bond ETF -- PCEF - An ETF that Focuses on CEF's (Closed End Funds) - And 1 Closed end Fund the Focuses on the Nasdaq - QQQX.

All of these over the several Years I have held them have paid Handsomely and stayed right around the "Baseline" (What I paid for them) - So I have Fairly Protected the Principal, while Making some money.

[Sum Dum Gai]

I don't do funds - but putting all your eggs in one basket is Not a good idea !

Her eggs wouldn't all be in one basket. The target fund holds a crap ton of individual stocks, bonds, other funds, commodities, etc, and rebalances for you as you age. Most of the ones I've seen tend to be a bit on the conservative side, so I'd pick a fund with a target date farther out than when you actually plan to retire, but that's just me.

[The Virginian]

Her eggs wouldn't all be in one basket

I understand that but ....... Putting everything in one Fund - Absolutely irresponsible in my opinion! ( Somehow I believe she is smarter than that though! )

[Driftr]

If that were my account I'd go with 100% S&P500 Index.

Future contributions to the 401(k) would be only up to whatever % will get you some match from your company.

Anything you can save goes into a savings account that you use to fund a Treasury Direct account. Any time you have any increments of $100 in savings > min balance, you buy 10 year Treasuries and set them to re-invest once. Direct the interest to your savings account and let the interest accumulate to help you buy more Treasuries until the Treasury balance is 50%-100% of your 401(k) balance. Or if you really don't like the yield on Treasuries, save up a bit more in that savings account and go open a brokerage account. Then buy a specific bond fund that you like. I have a little PTY and a little PMX.

Any of the money designated for 401(k) or Treasury purchases should not be money you will ever need for any emergency. Get 3-6 months of salary set aside in a money market account (or cash in a safe if you're concerned about the banking system) if you don't already have that.

That's what I would do in your situation.

[redkitty]

Interesting responses! I actually don't feel comfortable having all my eggs in one basket. I think that is why I started to try to diversify to begin with. I had everything in fixed income, and my 3 year return has been 5.3% which I know is pretty low. There are no dividends in any of our options apparently, I called this morning. I am also told there are no ticker symbols for any of our funds other than the DFA fund because they are setup specifically for our company. I find that strange. Maybe its not but I think its strange that the only way I can see how the funds are doing is on our website. It looks like our fixed income fund is 31% us treasury.

[redkitty]

I moved another 30% of the fixed income into the 2035 target fund this morning. I kept the Dodge & Cox 20%, S&P 500 20%, Midcap 20%. The remaining 10% is fixed income still. Does this seem diversified enough? Luckily I have the option to move things around as often as I like, with a few exceptions.

I have about a 9 month emergency fund that is half in ING and half in 5% cd's. I do like the idea of having cash available so after much thought, I think I would like to keep most of that as is. I am willing to invest future savings in a brokerage account, but would like to buy into specific stocks as opposed to S&P 500. I feel that since so much of my 401k is already in s&p, I would like the option of individual funds in a taxable account. I will look at PTY and PMX. Any other suggestions would be appreciated as well!

Thank you for all the responses! Greatly appreciated!

[The Virginian]

I knew you were smart ! ;D

[Driftr]

Oct 19, 2012 11:38:17 GMT -5 redkitty said:

I have about a 9 month emergency fund that is half in ING and half in 5% cd's.

5% CDs? Oh yeah, I remember those.

[redkitty]

Oct 19, 2012 13:21:30 GMT -5 The Virginian said:

I knew you were smart ! ;D

Awww, thanks!

[redkitty]

Oct 19, 2012 13:25:24 GMT -5 Driftr said:

Oct 19, 2012 11:38:17 GMT -5 redkitty said:

I have about a 9 month emergency fund that is half in ING and half in 5% cd's.

5% CDs? Oh yeah, I remember those.

Everyone said I was crazy when I put my money into 7 year cd's, but I still have 3 years of 5% interest ahead of me, so I am pretty happy to get that on an EF. Probably would have had more if I bought stock at that time, but I wasn't reading the forum at that time, so I didn't have all the great advice I am getting now! I also do like that I KNOW the money is there if I need it, piece of mind is priceless to me!

[buystoys]

Just be comfortable with some volatility in the mid-cap and S&P 500 funds right now. I'm about 10 years older than you are and I can remember how many fluctuations I've seen in the past 10 years.

Remember that you are looking at a LONG-TERM picture. These are monies you are NOT going to access tomorrow or a year from now. It's easy to get flustered when you see big swings in your retirement investments, but you are at an age where you need to take it with a grain of salt. A simple example is my peers from my last job when the market dropped drastically in Q4 of 2008. Many of them pulled out completely. I stayed in. Yes, I took a paper hit, but today I'm in a good place by staying the course. The ones who pulled out? Not so good today as they locked in those losses with no better returns. I wish I could have convinced my mom to stay in when she went to cash in early 2009. She could use that additional money today.