Best 401k funds

Booteefool
Booteefool

In which 401k basket should I put my eggs?

Wells Fargo advisor recommended to park 401k from previous job at Vanguard. Legit?

All urls found in this thread:
https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf
https://www.bogleheads.org/wiki/Tax-efficient_fund_placement
http://news.morningstar.com/index/indexReturn.html
https://personal.vanguard.com/us/funds/tools
https://investor.vanguard.com/investing/trading-fees-commissions
https://en.wikipedia.org/wiki/2003_mutual_fund_scandal)
https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/
https://www.bogleheads.org/wiki/Main_Page
King_Martha
King_Martha

Bump

Gigastrength
Gigastrength

Any experience with funds?

Deadlyinx
Deadlyinx

@Booteefool
Doesn't your employer choose that? Vanguard has low fees, fidelity has best service, idk about other brokers.

iluvmen
iluvmen

@Deadlyinx
Previous job implying that he quit the job with the plan and moved on?

RavySnake
RavySnake

@Booteefool
Legit?
Is the largest mutual fund company in the world legit? Is this a serious question?

New_Cliche
New_Cliche

@Deadlyinx
401k from previous employer
currently Wells Fargo
attempted consolidating, WF advisor suggested Vanguard for the old 401k instead. Kinda weird promoting competitors.

Evil_kitten
Evil_kitten

@RavySnake
Any personal experience with any of them?

Inmate
Inmate

@Evil_kitten
@Evil_kitten
Any personal experience with any of them?
Yes. I have substantial investments at Vanguard, and currently or have in the past own funds at or managed by Fidelity, American, Blackrock, PIMCO, Franklin Templeton, State Street Advisors, Inveco, Wells Fargo, and Oppenheimer. I am also knowledgeable about Dimensional Fund Advisors, but have not invested solely because they do not accept funds directly from investors bur rather only through financial advisors.

Personally, I don't think the fund family is the most important thing. I think things like fees and investment style are much more reflective of long-term performance.

Playboyize
Playboyize

Vanguard total stock market fund

Need_TLC
Need_TLC

@Inmate
any protips as to what is worth considering for investment within Vanguard?

viagrandad
viagrandad

@Need_TLC
Sure, happy to help. If you're just getting started with long-term investing or if you have less than $10k to invest, I'd recommend the Target Retirement funds. Pick a target date consistent with your current age, and you'll get a well-rounded, highly-diversified all-in-one fund that covers all of the core asset classes with extremely low fees.

If you have over $50K in investable assets and you feel comfortable tweaking your portfolio to match your needs and goals, then you can consider building a portfolio centered about the Total Market, Total Bond Market, Total International, and International Bond fund. With that base, you can start to add additional funds to fine-tune your risk and growth needs. Maybe even take a small percentage (5% or less) and try picking some individual stocks or ETFs (completely optional).

After that, if you really want to build a truly custom portfolio, you'll need to study your options and define your allocations. My ideal core portfolio recommendation to a young person would be something like:

50% VTI (Total Market)
20% VXUS (Total International)
10% VNQ (REIT)
5% VO (Midcap Blend)
4% VBR (Smallcap Value)
8% BND (US Bonds)
3% BNDX (International Bonds)

But your goal should be to get sufficiently educated and confident to decide this for yourself.

Poker_Star
Poker_Star

@viagrandad

If I put 100k into this and never added anything else, any how much would I have at 60 if I'm 29 now?

Ignoramus
Ignoramus

@Poker_Star
If I put 100k into this and never added anything else, any how much would I have at 60 if I'm 29 now?
First, I made several recommendations, so I'm not certain which you are asking about. Second, I can't predict the future and anyone who claims to be able to is clinically insane.

But if you're asking about the detailed recommendation, I can tell you that historically, this portfolio has returned approximately 11-12% annually with dividends reinvested. If you want to do a compounding calculated off that, feel free.

viagrandad
viagrandad

@Ignoramus

I meant the Vanguard funds

The calculator says you would have 1.7 million

But is that actually realistic?

I thought the s&p was only averaging ~2% this year.

Seems like there's a massive variance

Sorry if what I'm saying sounds stupid, I'm trying to learn.

Playboyize
Playboyize

@viagrandad
I meant the Vanguard funds
Everything I mentioned in my earlier post are Vanguard funds.

The calculator says you would have 1.7 million
But is that actually realistic?
Sounds low, to be honest. An aggressive portfolio doubles every seven years or so. Of course there are are other considerations, such as taxes. But to answer your question, yes it's entirely realistic. That's the power of buy-and hold investing.

I thought the s&p was only averaging ~2% this year.
You thought wrong. The S&P is up 7.62% YTD. Midcap and smallcap value stocks are both up over 14% YTD. Long-term bonds are also up about 14% YTD. I'm not sure where you're getting your information, but you're obviously not paying attention or you're being lied to.

Not to mention, the S&P 500 is just 500 stocks, and all largecaps at that. You'll notice my recommendation is substantially broader than that (there's probably 8000 different holdings included in those funds combined). There's a reason we diversify.

Sorry if what I'm saying sounds stupid, I'm trying to learn.
If you're honestly trying to learn, then keep on asking questions. There's a lot of bad information and advice out there, so learning how to spot the truth is the most important thing you can learn on this site.

TreeEater
TreeEater

@Playboyize

The 2% was something I've heard on biz several times. Didn't surprise me that it's bullshit.

The reason I ask is that I have about 300k, but haven't learned enough to feel comfortable investing it yet.

Should I just put it all in Vanguard in a lump sum or DCA it over the next year?

How badly do taxes eat this portfolio?

I have a paid cut house and minimal expenses, but my income is low right now.

Thank you very much for helping me.

My goal is to honor my parents money by growing it to help my children

Stupidasole
Stupidasole

@TreeEater
I've heard on biz several times
Yes, Veeky Forums likes to lie about index funds because people here pretend to be successful day traders and stock pickers. However, the only people here who actually have real money all use index funds to one degree or another.

Should I just put it all in Vanguard in a lump sum or DCA it over the next year?
The research says that LSI (lump sum investing) outperforms DCA (dollar cost averaging) in 2/3rd of cases.

https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

However, given current stock market levels -- which are admittedly on the elevated side of the curve (not catastrophically, like some idiot predict ... but objectively market P/Es are up there) -- I wouldn't fault anyone for going either way.

How badly do taxes eat this portfolio?
It's a relatively tax efficient portfolio, as are most index-based portfolios, because there's not a lot of churn inside the fund. The bonds obviously through off some current income, and the small caps. REIT, and internationals can be slightly unpredictable on distributions from year to year.

If you have tax-advantaged contributions available to you, put the higher yielding funds into your 401k/IRA/Roth/SEP-IRA. You can also look at Vanguard's tax-managed funds as replacements for some of my recommendations. They actually perform extremely well (my tax-managed small cap is outperforming my small-cap index) albeit with slightly higher fees.

Stark_Naked
Stark_Naked

@Stupidasole

So do these numbers assume all of that is in a 401k or IRA for it to be a tax efficient portfolio?

Booteefool
Booteefool

@Stark_Naked
Performance numbers are almost always reported without taking into consideration taxes because everyone's situation is different. My capital gains rate may not be the same as yours, for example.

However, to answer your question, the tax-efficiency of an investment is derived from the nature of the investment and how the investment is handled. Index funds are inherently tax efficient because the fund manager isn't constantly looking to to buy and sell holdings (which generates taxable events for investors). An index fund seeks to match the index, and thus there's very little (not zero, but very little) taxable trading that goes on inside an index fund. Thus, they are generally considered good funds to hold in a taxable account.

Inside a tax-sheltered account (IRA, 401k, etc.) we don't really care about the tax-efficiency of the investment because the tax is deferred anyway. So we stick our investments with the highest tax consequences inside these accounts. This typically includes high-yield bonds, REITS and other more volatile investments.

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

Lord_Tryzalot
Lord_Tryzalot

@Booteefool

How hard is it to file your taxes when you have a portfolio like that?

Thank you very much

How have you been btw?

SomethingNew
SomethingNew

@Lord_Tryzalot
How hard is it to file your taxes when you have a portfolio like that?
Not hard. Vanguard (or any brokerage, for that matter) will issue you a consolidated 1099B that has everything you need. If you prepare your own taxes using software (e.g., Turbotax) it will import all the information automatically.

My fund investments are probably the easiest part of my taxes, and I actually own over 40 separate funds (don't ask).

Thank you very much
You're welcome.

Carnalpleasure
Carnalpleasure

@SomethingNew

I forgot to ask

How did the growth work on these funds?

If the s&p fund is up 7%,did that mean it created a 7% dividend or that it just grew by 7%.

How do you automatically reinvest the earnings with Vanguard?

BlogWobbles
BlogWobbles

@Carnalpleasure
How did the growth work on these funds?
If the s&p fund is up 7%,did that mean it created a 7% dividend or that it just grew by 7%.
Different investments sometimes use different methodology, so you are smart to ask about the details. In this case, all of the figures I quoted are "total return" numbers which includes both income (in the form of dividends or interest payments) and price change (the increase or decrease in the value of a security).

Here's the best source I've found to see how various market segments are actually performing:

http://news.morningstar.com/index/indexReturn.html

How do you automatically reinvest the earnings with Vanguard?
You check a box, and Vanguard handles it automatically. Every month (for bonds) or three months (for funds) you get a distribution, and Vanguard adds the corresponding number of shares to your account.

whereismyname
whereismyname

@viagrandad
Thanks user, this thread is turning to gold.

How should I change my portfolio when the market dives? Do you have any methodology?

How wrong am I if I prefer more volatile but diversified investments?

What are the key aspects of funds to consider before investing?

CodeBuns
CodeBuns

@whereismyname
How should I change my portfolio when the market dives?
I don't believe in timing the market. Study after study shows its one of the two reasons why the average investor underperforms the market. I won't go into the full explanation here, but I take a very long-term view on my investments and try not to let short term volatility affect my decisions and strategy.

How wrong am I if I prefer more volatile but diversified investments?
Risk is an individual consideration. Everyone should set the risk dial on their portfolio at the level that matches their individual needs and goals.

The problem with risk is that most people who like to add risk are very bad at judging how to do it properly. Risk is fine, as long as its coupled with an appropriate risk premium.

In my experience, young people are too quick to add risk to their portfolio (and do it poorly) and older people are too quick to remove risk from their nest egg (and stunt their golden years). I don't know enough to judge your case, but I'm skeptical based on past experience.

What are the key aspects of funds to consider before investing?
For an index fund, its very easy. Fees, fees, fees. Since they all do a pretty good job tracking the benchmark (something you should also look at), the only real difference among is fees. I tend to recommend Vanguard, but to be honest, Schwab and Fidelity index funds are functionally equivalent.

For actively managed funds, first consideration is still fees. It's a huge factor in predicting your long-term executed performance (probably the most important, to be accurate). Beyond that, I look at historical performance versus a close benchmark. If a manager can't even show the ability to sometimes beat an index, then I just buy the index. Next would be after-tax performance and historical distributions. A manager can fake good performance by churning his holdings, which might look good on the top line, but generates bad tax events.

Hope that helps.

Evil_kitten
Evil_kitten

@CodeBuns
It all definitely helps. I'm actually saving it to use as a reference once I complete consolidating funds.

Poker_Star
Poker_Star

@viagrandad
This is a lot of ETFs. It would be better to just get less ETFs that hold the same thing. OP, I recommend the book Random Walk Down Wall Street before you do any investing

VisualMaster
VisualMaster

@Poker_Star
This is a lot of ETFs. It would be better to just get less ETFs that hold the same thing.
I suggest you spend a little more time understanding the recommendation before making silly criticisms.

First, I gave two examples of simpler portfolios for those who don't want to manage individual holding.

Second, seven holdings is hardly a lot for an advanced diversified core index portfolio.

Third, my recommendation includes strategic over-weighting in midcaps and smallcaps due to the growing body of evidence that shows this strategy can add to returns without increasing risk. There is zero unintended duplication in my detailed recommended allocation.

We're having a nice, adult, productive thread here. I know its Veeky Forums and everyone thinks they can say whatever, but it would be nice if we kept the level of discourse elevated, for once.

iluvmen
iluvmen

@VisualMaster

Why do you choose ETFs over index funds?

TreeEater
TreeEater

@iluvmen
ETFs are an exchange traded fund; so a fund that's sold as a stock in an exchange. ETFs are index funds to an extend; not all index funds are good, it depended on what is being indexed. read the book and ignore that other guy for now, and then read what he says after reading Random Walk.

ZeroReborn
ZeroReborn

@iluvmen
Why do you choose ETFs over index funds?
Personally, I own mostly funds. But my portfolio was constructed and mostly purchased back when the differences were greater and funds better suited my needs.

Today, most fund families (including Vanguard) have switched their accounts to a brokerage system in order to comply with SEC regulations. As such, you no longer have a separate fund account and a separate ETF/brokerage account -- you just have one account that serves for both. In connection with this change, Vanguard eliminated most of the differences between the two investment types. And Vanguard (like most houses) doesn't ever charge commissions for buying their own ETFs.

So, in present day, ETFs have all the advantages of funds but guarantee you the lowest fees (equivalent to Admiral class funds) regardless of your investment level. That's a big plus for new and smaller investors, IF you also pay no commissions. The only modern advantage of funds is the ability to do automatic purchases, such as through payroll deductions.

If you want to dive into the details, Vanguard has two free tools, one to compare their funds vs their ETFs, and one to compare their relative long-term costs.

https://personal.vanguard.com/us/funds/tools

To be clear, if, for some reason, you cannot avoid commission charges on ETF purchases, then my advice will likely switch over to funds. But at least for now with the options available, I think ETFs are probably the better choice for most new and newer investors.

Nude_Bikergirl
Nude_Bikergirl

@ZeroReborn

I compared several of the ones you listed and there doesn't seem to be any real difference.

Are there fees on the Vanguard ETFs?

Thank you again for your advice.

haveahappyday
haveahappyday

@Nude_Bikergirl
Are there fees on the Vanguard ETFs?
Depends how you buy them. One of the advantages of ETFs is that you can buy them with any brokerage account anywhere. So a Vanguard ETF can be purchased from any brokerage account, be it at Vanguard, eTrade, Robinhood, or wherever.

Every brokerage has their own commission structure.

If you open you account at Vanguard, then you pay no commissions ever to purchase (or sell) Vanguard ETFs.

https://investor.vanguard.com/investing/trading-fees-commissions

askme
askme

@Booteefool
suck a top performing hedgies ding dong and ask him if he wanna invest your money.

That guy from Renaissance capital is a good bet. James Simmons or something what a baller.

massdebater
massdebater

@askme
pics?

Snarelure
Snarelure

@haveahappyday

I see what you mean. I plan to do all of my investing with Vanguard, so I guess those fees don't matter.

I know this might sound like a stupid question, but do you worry about having so much of your money with Vanguard?

I know it's the largest, but you never know who is or isn't currently or may become a ponzi at some point in the future.

I guess my question is if you should diversify your place of investments

BinaryMan
BinaryMan

@Snarelure
do you worry about having so much of your money with Vanguard?
Yes, I have given it consideration. It's a fair question.

However there are many reasons why I sleep comfortably at night. Vanguard is large enough and its employees successful enough that there's little reason why they would ever want or need to cheat their clients. Also, government regulation of mutual funds is extremely strict. No investor in the history of the U.S. has ever lost money due to a mutual fund failing or other shenanigans. The worst that has ever happened is that some funds were accused in the past of front-running client trades, which is a far cry fom stealing or fraud. (https://en.wikipedia.org/wiki/2003_mutual_fund_scandal)

Lastly, and most importantly, Vanguard is investor owned. Vanguard is owned by the individual funds, which are themselves owned by the investors. So Vanguard stealing from their clients doesn't even make sense because the beneficiary would be the funds, which are owned by the clients.

https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

Sir_Gallonhead
Sir_Gallonhead

@BinaryMan
any favorite online resources that might help when making investment decisions?

Boy_vs_Girl
Boy_vs_Girl

@Sir_Gallonhead
any favorite online resources that might help when making investment decisions?
If you want serious information about indexing, low-cost actively-managed mutual funds, retirement savings, taxes and tax-efficient investing, and setting saving and spending goals, there's no better source than the Bogleheads wiki.

https://www.bogleheads.org/wiki/Main_Page

The forums are also the best place to ask adult finance and business questions. Let's be honest here a moment: Veeky Forums is really only good for giggles and some humor. A quality thread like this is a needle in a haystack. Pardon my ranting, but I'm shocked the cryptokiddies, daytrading wizards, and forex jockies haven't already flooded the thread with their roleplaying and frog memes. You won't normally find any useful advice here, and if you do, you should verify it elsewhere before acting on it (and yes that applies to everything I've said too).

iluvmen
iluvmen

@Boy_vs_Girl

I know this isn't finance related ihaz, but I know you're older and I respect your opinion.

My dad passed away last week. I've been web absolute mess and have been deep in depression. I can't eat or sleep or even work.

We had a trade job together as partners. I doubt I can keep it going by myself and it's not even that profitable.

He left me about 300k. I just want to grow it and have a family someday.

I have no idea what to do with my life now.

Any advice you could give me would be appreciated.

Poker_Star
Poker_Star

@iluvmen
sorry for your loss user, what trade?

Methnerd
Methnerd

@Poker_Star

Thank you

Plumbing and HVAC

CouchChiller
CouchChiller

@Methnerd
Well with an HVAC certification you shouldn't ever have trouble finding work if you feel you don't have the desire to own your own business. You know 300k is really a tremendous sum of money and you could take a considerable amount of time away from working without even making a large dent into it.

This might be a better question for /adv/ though rather than Veeky Forums. The people there are usually pretty helpful about dealing with grief and that kind of stuff.

TechHater
TechHater

@iluvmen
Sorry for your loss. I wish I could give you some detailed advice, but not knowing you personally I can only venture some general observations.

First, don't make any permanent financial decisions so soon after the passing of your father. Grief can influence your outlook, your judgment, and your motivations in both overt and subtle ways. I know this is not always possible, but always try to defer important financial decisions until after you've had an opportunity to process the present emotions and manage the inevitable stress that accompanies any life-changing event.

In a few weeks, or however long it takes, take a hard look at your trade business from an objective standpoint. What are its prospects going forward? What opportunities exist to improve things? Is this a career that can provide for you and your future family in a way consistent with your goals? Make fair but harsh judgments, and try not to be influenced by emotional considerations (which may be heard considering its a family business).

Then, compare that assessment to your realistic alternative opportunities. What other career oaths might you consider, and can you get there? What would be the costs in time, education, training, and capital expense to get there? How quickly (if ever) would the alternative pay better than your current trade? Again, be fair but honest in your assessments.

I'm sure it seems a bit overwhelming now. I've faced difficult milestone paths in my life too, and it's tough. The money your father left you is a blessing. It'll give you both time to make a decision when things are clearer, and opens up many possibilities.

Yes, you should save and invest that money, for as long as possible. It's a great way to honor his memory, since you'll be helping make a better life for his family, which is, I'm sure, what he wanted. But investing it can also mean investing it in the trade, or, in yourself to find a new path.

I wish you well.

TechHater
TechHater

@Methnerd
Sorry for your loss.

If you have decent skills and not that lazy then
a) lack of advertisement. You got money to fix it
b) live in a poor area. You got money to relocate to economically stronger area and relocate your business. You don't have a family yet so relocating is easy.
c) too much competition. Similar solution as b.
d) smoke too much weed or drink too much... Man up and deal with it.

If you are lazy with so-so skills, get into a union.

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