Critique my 401k investment choices.

[BigVic]

Hey all. I would like to hear what you all think about my current investment choices and what changes could be made if any are needed.

I'm 24 and invest up to the company match. YTD I am at almost 22%.

My current investments are:

Stock Investments LARGE CAP FID GROWTH COMPANY 10%
Stock Investments LARGE CAP SPARTAN US EQ INDEX 60%
Stock Investments MID-CAP FIDELITY LOW PR STK 10%
Stock Investments INTERNATIONAL AMER CAP WRLD G&I R4 20%


The funds available to me are:

(FID FREEDOM FUNDS)
Blended Fund Investments -- FID FREEDOM INCOME
Bond Investments Stable Value FID MGD INC PORT
Bond Investments Income FIDELITY GOVT INCOME
Bond Investments Income PIM TOTAL RT INST
Stock Investments Large Cap ABF LG CAP VAL INV
Stock Investments Large Cap DAVIS NY VENTURE A
Stock Investments Large Cap FID GROWTH COMPANY 10%
Stock Investments Large Cap SPARTAN US EQ INDEX 60%
Stock Investments Mid-Cap FIDELITY LOW PR STK 10%
Stock Investments Mid-Cap MSIF MID CAP GRTH P
Stock Investments Small Cap ABF SM CAP VAL INV
Stock Investments Small Cap ROYCE VALUE PLUS SER
Stock Investments International AMER CAP WRLD G&I R4 20%
Stock Investments International FID DIVERSIFIED INTL



Thanks for any insight you can provide.

[creditcardchaser]

Personally, I would want to see a little more small cap exposure and maybe even some more international exposure that what you have but overall it doesn't look too bad.

[Broken Arrow]

At the risk of sounding lazy, it's kind of hard to say without tickers....

How do you feel about the low-priced fund and the growth fund? Any particular reason why you chose those?

Also, how do you feel about 100% stocks?

This could be appropriate if you have a high risk tolerance and have a taste for adventure (hence the reason why I ask about the low-priced fund and the growth fund). If not, then I would probably change those two funds based on your risk tolerance and personal preferences.

[BigVic]

So do you think the Freedom 2050 fund is a better route?

[Broken Arrow]

Unless you have specific preferences and if the aggressiveness the Freedom funds are unsuitable for you somehow, then yes, I do think the Freedom funds are the better way to go.

In fact, my current 401(k) is 100% into Freedom Fund 2040.

Target retirement type funds aren't always perfect, as cookie-cutter solutions will never be the ideal solution for every situation. But... before someone decides to move beyond them, I strongly recommend to understand how these funds work, and then be able to clearly articulate why they don't fit your needs. More often than not, I think people will find that it manual slice and dice will only complicate things with very little gain in the process.

That's why I haven't moved beyond them either, because I don't see how I can do it that much better right now, rather than just sitting on this one fund.

[BigVic]

My target date would be around 2050 but I see that the 2040 has a 4 star morningstar rating and has been around a little longer than the 2050 which has a 3 star rating. The 2040's expense ratio is lower too. Do you think the 2040 might be the best option for me even though my target date is 2050?

[Broken Arrow]

I recommend to stick with the target horizon of your retirement. That's how these fund (of funds) are designed and that's how we should use them most of the time.

As such, because I am 35 years old, that's why I'm in 2040, not 2050. So, for you, 2050 is appropriate.

Oh, and one more thing. I would take Morningstar ratings with a grain of salt. They are arbitrary measures of performance relative to similar fund types in the industry. It has its uses, but it doesn't always mean that a high star fund is somehow superior to a low star fund, nor does it tell us at all whether it's appropriate for us in our asset allocation. This is probably more useful when looking at actively managed specialty and concentrated funds....

[kanjoh]

The most important thing to think about is the fees (are there loads, what is the annual fee?). 75% of mutual funds underperform their benchmark index, and its really hard to figure out which 25% outperform in a given year. Therefore, I recommend going with index funds so as to mirror the market while minimizing your fees.

Lifecycle funds are also great. Vanguard has a great, inexpensive set of offerings here.

[jIM_Ohio]

Royce funds are usually small cap oriented and I was impressed with them when I had one fund in my Vanguard 401k with them a few years back.

Without knowing your risk tolerance, the fund choices are meaningless.

[Brad VanGuard]

Looks like you're doing great, if I may, I would like to suggest a site that deals with 401K information:

401K Withdrawal Rules

Let me know if it helps!

[snafu]

Given your age and the length of time you have until you need to be more risk adverse...I suggest you start looking at some International Stocks...particularly those in S. American. You could widen your horizon by investing in a non retirement fund without support from your employer!