401k thread

LilacDreamer

Yay. a super fun thread.

My husband turns 32 today, and his 401k is terrrrible. Seriously. I don't think I can put enough r's in the word terrible to really paint you all a picture of how awful it is.

He's been super super super conservative, and had 100% in what seem to be bonds (even though they're not called bonds). He was also contributing a very low percentage of income to the 401k.

So I just changed everything around, increased the contribution percentage by 3 times as much as it was before, and I put 65% in stocks. Could be a bad move, but I tried to choose stocks that have a high return percentage. I really don't know anything about this, so it's an experiment I guess.

So my question to you all is this: To those that have a 401, are you all about stocks, bonds, or both? What's your percentage/ratio?

Edit: I really don't understand how to find out how much his company match % is. :sad:

ScatteredThoughts

Mine is in a targeted maturity fund, where they automatically adjust the percentage of stocks and bonds based on the age of the fund. Currently it is about 75% stocks and 25% bonds. I've always heard that you should invest more in stocks when early on, and then transition more to bonds, to reduce risk, as you get closer to retirement.

I'd be a little careful about raising the contribution percentage, without knowing how much his employer will match. I'm guessing you are making the changes through the plan web site. If you can't find the details about employer match there, then contact the HR/Benefits person who handles that stuff.

honeysprinkles

I'm taking a personal finance class right now, so I have no personal experience with any of this yet but I'll share what I'm learning.
110 - your age is the % you should invest in equities apparently, so 65% seems to be low if you're going off that, but I'm sure there are other opinions on that.

and as for choosing where to invest, index funds might be a better idea than investing in stocks individually, it can be a lot cheaper, you'll be more diversified, and they generally perform well.
http://www.forbes.com/sites/rickferri/2010/09/23/5-lies-about-index-funds/

I would also make sure you are contributing enough to get the full employer match, but I have no actual experience with any of this so I don't know how to go about doing that yet lol.

hopefully some of this will help, sorry if it's all really basic or not that helpful!

vtmoon

I need 3 more shut downs in the next 30 years and I will be a very happy camper. I made out like a bandit from this shutdown. But I'm an idiot who loves the rush of risk. 100% in stock, though I have around 30% in Stocks like PG, CLX, and other safe long term stocks.

whierd

I am in a mixture of mutual funds at the moment with no bonds. I'm at 14.1% YTD growth.

vtmoon

I am in a mixture of mutual funds at the moment with no bonds. I'm at 14.1% YTD growth.

That is pretty solid if self managed.

TheSlorax

mine is all vested in stable accounts right now but my employer is contributing a lot to it so I am happy with the growth. I may diversify a little bit in the future, but I also don't want to take a risk on it as I possibly plan to use it to buy a house in a few years. right now my company is matching my contributions dollar for dollar (eta: at a high contribution %) so I think I'll just sit tight.

it may be that your husband is contributing too little to the account. it goes without saying that at the very least he should be contributing the maximum his employer will match. it also works better for me in the long run to invest more in my 401k as the bulk of my income is based on "bonuses" which means I'm taxed pretty heavily, at least relative to what I make. 401k contributions are tax deferred (you will not pay taxes until you liquidate the funds). that may be one way you can justify a higher contribution to him.

TheSlorax

I am in a mixture of mutual funds at the moment with no bonds. I'm at 14.1% YTD growth.

14%?! you're a ****ing wizard

Beastmaster50

My plan offers automatic adjustments based off risk. They allocate the money between mutual funds and bonds. It's worked well for me so far.

Carl01

Perhaps look into funds that set a target retirement date like Fidelitys Freedom funds.
They try to have a portfolio that is aggressive for those with a far away retirement date and more conservative for those approaching it.

samammay

I'd like to chime in that just about every 401k plan manager offers some sort of service that does the allocations for you. Doing it yourself, unless its something you are willing to invest time into researching heavily, is a good plan for disaster.

For me, I have all mutual funds, 65% in domestic large cap, 15% small cap, 15% international and specific sector, 5% bonds. My YTD growth is 18.5% but I cant take much credit for that. I just picked a few funds from the ones my plan allowed.

taunto

ice cream and old computers are my retirement fund...

GGDaddy

I put 65% in stocks. Could be a bad move, but I tried to choose stocks that have a high return percentage. I really don't know anything about this, so it's an experiment I guess.

Are you buying mutual funds, or individual stocks?

If mutual funds--be sure to spread around different companies. You never know when one company is going to have major structural issues that impact all of their funds. e.g. some in Vanguard funds, some in Janus Funds, some in Oppenheimer funds. I don't necessarily advocate for those, nor against.

Seriously seriously consider a Vanguard Index fund, as it has been shown scientifically that 90% of mutual funds fail to earn a return rate suffiently higher than the market return to justify their management fees. If you're aiming for the top 10% (i.e. "top decile"), look at Morningstar ratings. Top decile funds have a statistically significant likelihood of outpacing the market even with management fees taken into account. Be sure to reallocate each year, since it is only a 1 year effect. If buying an index fund, I recommend attempting to replicate the entire market, rather than simply a DJIA or S&P 500 fund. For example, 10% in a small cap fund, 10% in an international fund (not global which includes the U.S.), 7% in a midcap fund, and the remainder in an S&P 500 index fund. Avoid DJIA index funds, that's just 30 stocks.

If buying individual stocks: be sure to diversify among 10 stocks in different industries (or among 15 stocks in similar industries) to significantly reduce your exposure to idiosyncratic risk and to limit yourself to just the systemic risk. High growth stocks are priced with more risk in them, so might not be the optimal long term strategy. For picking individual stocks, read Peter Lynch's Beating the Street, Learn to Earn, and One Up on Wall Street.

I like the previous poster's recommendation of 110-age to determine percentage of stocks as an initial guide. But it's much too conservative for people younger than 50, consider a higher stock percentage.

This is not intended as investment advice. Please consult an investment professional for specific recommendations that are applicable to your specific situation. Please also be aware that 95% of investment professionals are simply trying to sell you the stocks that either (1) their company is pushing because they hold a lot of shares, or (2) the fund family is paying a kickback (excuse me, I mean a commission) to that advisor for selling their funds. No joke, no kidding, it should be criminal.

Good luck!


Edit: typo

whierd

I am in a mixture of mutual funds at the moment with no bonds. I'm at 14.1% YTD growth.

That is pretty solid if self managed.

Yup. Spread across a few different types and with funds that have excellent track records.