Please Critique My 401k Plan

**jIM_Ohio** · 02-12-2008, 06:29 AM

I think you need to rethink asset allocation. Have you done an xray of this?

Not sure why you would do total stock market index AND 50% large cap stocks (75% of total stock market is large caps).

Not sure why you would do the RE fund, not sure why you would do on 5% to small cap, international and mid cap.

My immediate thought would be drop the 20% you have as specialty (is this your term or your employers?), and reallocate to small cap and mid cap and international.

I would attempt to get international exposure up to 20%, and mid/small caps to at least 10% each, probably more.

I love the Dodge and Cox choice. I don't know anything about most of the other funds listed, but the dodge and cox choice was the best decision made thus far.

Are other funds available? Have you decided on an asset allocation? Have you read about investing for long term to know how and why a particular asset allocation is used?

**tifnglen** · 02-12-2008, 06:52 AM

Originally posted by jIM_Ohio View Post

I think you need to rethink asset allocation. Have you done an xray of this?

Not sure why you would do total stock market index AND 50% large cap stocks (75% of total stock market is large caps).

I dont know a lot about the stock market

Not sure why you would do the RE fund, not sure why you would do on 5% to small cap, international and mid cap.

My immediate thought would be drop the 20% you have as specialty (is this your term or your employers?), and reallocate to small cap and mid cap and international.

Ok I will consider this. All of these choices were mine. My employer uses fidelity.

I would attempt to get international exposure up to 20%, and mid/small caps to at least 10% each, probably more.

OK thanks for the advice

I love the Dodge and Cox choice. I don't know anything about most of the other funds listed, but the dodge and cox choice was the best decision made thus far.

Are other funds available? Have you decided on an asset allocation? Have you read about investing for long term to know how and why a particular asset allocation is used?

Yes I have read but I do need to read more.

**sweeps** · 02-12-2008, 07:07 AM

Hi tif. Jim makes some good points. A common thing people do (I used to do it myself) is look at the list of funds and just spread your money across all of them. That's really not the way to do it.

The LifePath fund for example, is mostly meant to be by itself. One valid strategy would be putting 100% of your money in that fund, and leave it at that.

Similarly, the Total Stock Market fund covers the whole U.S. stock market. So in general it's not useful to invest in that and invest in large cap, mid cap, and small cap funds at the same time. (Although there are exceptions.)

My other comment would be your international exposure should be higher. In my opinion, at least 20% of your portfolio should be in international stocks.

The good news is I don't see any cash or bonds holdings. That's good. You're young and should be aggressive in your investing.

**jIM_Ohio** · 02-12-2008, 09:00 AM

I missed the lifepath allocation at top, that makes little sense (to me).

The total stock market index is

75% large cap
15% mid cap
10% small cap

and I think bogleheads (indexers) really don't believe in mid caps anyway. So it is 75% large cap and 25% not large cap (small cap).

Large cap means large companies. Microsoft is worth around $200 Billion I think. GE is worth more than $300 Billion. General Motors is "only" worth $10 Billion or so. All are considered large.

A mid cap is a middle sized company, probably worth around $2 Billion to $5 billion. Greater than $5 billion is a large cap. less than $2 billion is a small cap.

Small caps are tiny companies. Could be worth $200 million to $2 billion.

Each size of company tends to behave with moderate to significant differences. Large caps give consistent performance. Good for when times are tough. Small caps tend to get higher profit margins and all companies were small at some point when they began (Microsoft started in a garage somewhere).

International stocks can be divided into large and small as well. But all large are not equal. A large company in Africa might be worth $100 million. In the US that's off the small cap radar, in Africa that might be one of the 2-3 largest companies on the continent.

**atomicrc11** · 02-12-2008, 10:05 AM

The State Farm Lifepath funds are ok, but they expenses are quite high. The lowest share class has an expense ratio of 1.16%. I would advise using the other funds to get the allocation you are looking for as advised above.

**Slug** · 02-12-2008, 12:42 PM

Yeah, my first question is what are the other funds available that you didn't list? Secondly, let's look at expense ratios to weed out funds that offer similar strategies. Thirdly, we can then start think about allocations.

I'm assuming the 5% you're putting in maxes out any employer contribution?

I also have questions about ING vs. money mkt. but that's a different topic.

Please Critique My 401k Plan