Finally Getting 401k, Does this make sense?

[myrdale]

Good evening everyone.

The company I work for will be starting a 401k in a couple of weeks. I am absolutely thrilled!!

They are going to match 100% of the first 3% and half past that up to 5%. If I put in 5% they put in 4%. I currently earn about $57k a year. My 5% would be $237 a month and with their match it will be $426. I am 26 years old, and according to their calculator, I look to have a very bright future ahead of me God willing (even if it's 50 years away).

The 401k is though Nationwide. Could anyone tell me if this break down makes sense:

Percent Option 10 Year Annualization
20% Fed Kaufmann Fd A (Mid-cap) 10.13%
30% Growth Fund of America R3 (Large-cap) 9.5%
30% Janus Ad Forty S (Large-cap) 11.59%
20% FidelityAdv Freedom 2040 A (Balanced) 10.89%

Originally I was going to put it all into the Janus, but I decided it might be a bit better if I spread them out. I think they are all considered agressive, with average or slightly above average risk with above average or high rates of returns (apart from the Fidelity but it is only been around since 2003).

Does this make sense? My money has many decades to work for me and I am more than aware things go up and down, but I have faith they will go up on average.

Any comments would be appreciated. Thankyou all!

[sweeps]

Congrats on the new 401k -- definitely put in the 5% to max out your match. Regarding the funds, what are the other fund options available to you?

[disneysteve]

Do you have other investments outside of this plan?

I don't see any International exposure. There may be some in the Balanced fund, but probably very little in the overall allocation. I'd suggest 20% or more to Internationals. I'd probably stick with one large cap fund. Getting 2 is probably just giving you a lot of overlap. So maybe cut back your large caps and add an international fund.

[noppenbd]

I would avoid Fed Kaufmann Fd-A. The fees are outrageous (2.2%).

Are there other small-cap choices?

You could also just go with the Fidelity Freedom Fund. It is a blend of a lot of funds and should automatically adjust your asset allocation as you age.

Even though you are spreading out your money over a variety of funds, in reality there will be a lot of overlap between the large-cap funds, so you are not as diversified as you think. In reality, just using the FFF will be more diversified than adding the large-cap funds.

[Broken Arrow]

I would shoot for 8% to capture the full match.

Yes, the Freedom Fund is Fidelity's target retirement product. As a Fund of Funds, it is already diversified for you. You could technically put all of your money into that and call it a day. Here's a list of the fund's composition.

The rest of the funds actually isn't diversifying anything IMO... unless you wanted to slice & dice your own (without the Freedom Fund). In which case, I would say that, for a 26 year old, you have way too much large caps.... It would also be missing small-caps, internationals, and perhaps bond funds as well. And that would be a typical diversification scenario without getting into other options out there.

My standard suggestion is put it all into the Freedom Fund until you have a specific investment strategy in mind....

[myrdale]

EDIT

I had a link here to the 401k options, however it was though a personal site. Additionaly you had to copy and paste the address which I disliked. I am deleting the link until I find some easier and more anynomous means of posting it.

Night!

[myrdale]

Disneysteve, I do not have any investments at this time, however I am planning on looking into an IRA soon.

Brooken Arrow, at 5% I am receiving the full match. I will see how this goes, but I will be looking at increasing in the future.

I do not have the book with the break downs of each infront of me, but on average, they are about 2/3 US stocks, 1/4 internation, 1/10 cash.

Noopened, thanks the sort of stuff I am curious about.

[scfr]

Congrats on getting the 401K, and bravo on contributing! I agree w/ BA that putting everything in the Freedom fund would be a decent way to start. Here's how the Morningstar X-Ray broke it down...looks pretty good:

Portfolio
Cash 3.72
U.S. Stocks 63.09
Foreign Stocks 18.50
Bonds 10.30
Other 4.41
Not Classified 0.00

Can't copy over the stock style diversification, but it looked pretty well spread out.
I noticed the X-Ray showed all of the bonds as low-quality ... that would bother me, but I'm much older than you and quite conservative ... it may not bother you.


If you want to toy with some other scenarios on the X-Ray, here's the site:
Instant XRay entry page

[dardhel]

I would go with the low fee Freedom Fund aswell... Good breakdown and internally it is indexed pretty well with low fees.

[myrdale]

Thankyou all for the input. And thankyou scfr and BrokenArrow for the two websites. We will see what the future brings!!

I do disliked using my google image account above though. I am editing out that link for now until I find some other means of linking.

Thankyou all again for the time and help.