HELP!! What is the best way to allocate my 401k?

**violet80907** · 12-28-2012, 02:07 PM

A relatively traditional route for someone in their 20's would be 80% equities/20% bonds; both groups could have some diversification.

This looks reasonable as a single fund.
Goldman Sachs Growth & Inc Strat CL C (GOICX) (Morningstar 2 star)
Domestic Equities 32.61
Domestic Bonds 15.26
Convertibles 0.02
Cash 13.55
Foreign Equities 23.28
Foreign Bonds 13.57
Preferreds 0.18
Other 1.52

Some would argue that because you are young, skip bonds and invest more heavily in equities, as over the long run they have performed better. There is more risk and volatility. Note that the 10 year return on GOICX and GGSCX is similar, but GGSCX has had a higher high and lower low. Both lost almost all gains made during 2003-2008 during the 2008 downturn.
Goldman Sachs Growth Strat CL C (GGSCX) (Morningstar 1 star)
Domestic Equities 41.40
Domestic Bonds 9.17
Convertibles 0.02
Cash 12.18
Foreign Equities 34.91
Foreign Bonds 1.44
Preferreds 0.23
Other 0.65

Goldman Sachs Eq Growth Strat CL C (GAXCX) (Morningstar 2 star) looks to go a little further, and has almost no bonds, but more foreign equities.
Domestic Equities 47.88
Domestic Bonds 1.09
Cash 1.79
Foreign Equities 48.27
Foreign Bonds 0.12
Preferreds 0.27
Other 0.58

At the more conservative end (more bonds) is Goldman Sachs Balanced Strat CL C (GIPCX) (Morningstar 2 star)
Domestic Equities 23.53
Domestic Bonds 19.81
Convertibles 0.03
Cash 14.67
Foreign Equities 11.94
Foreign Bonds 27.38
Preferreds 0.11
Other 2.53

In looking through your options I found it striking that they are all rated only 1 or 2 stars by Morningstar. The expenses are all 2+%, which may be some of the reason for the poor rating. The options other than the ones I listed above are all targeted enough that you would need to create a portfolio by mixing the options.

I'd just go with one of the mixed options I listed, instead of trying to create your mix. Learn more, then maybe take a shot at mixing your own portfolio. However, I'd check and see if your plan offers you "brokerage" option whereby you can trade securities outside of the options you listed. I would then look for more highly rated and/or lower cost funds.

Also, when making a post like this, it would really help if you gave the symbols for the funds. It is MUCH easier to look up a security from the symbol than from the name, and eliminates any errors; especially in this case where Goldman has many funds, all with similar names, and different share classes.

**kv968** · 12-29-2012, 03:16 AM

Does your company offer a match? If not you'd be better off putting your money into an IRA first.

The expense ratios of the funds available (2-plus %) are very high.

**violet80907** · 12-29-2012, 04:53 AM

Originally posted by kv968 View Post

If not you'd be better off putting your money into an IRA first.

Or better, do both - but make sure the contributions are deductible. Since your employer has a 401K available, your contribution is only deductible if your AGI < $58K (single) or < $92K (married filling jointly). If you Google "IRA deduction limits" the first link is to the IRA website, which has all the rules.

So get as much money as you can into pre-tax accounts, and invest in low expense index funds with broad exposure. Maybe split it to have some bond market exposure. (I.E. the ETFs SPY (S&P 500) and LQD (investment grade corporate bonds or VBLTX(another bond fund option) )

**BuckyBadger** · 12-31-2012, 09:12 AM

Originally posted by kv968 View Post

Does your company offer a match? If not you'd be better off putting your money into an IRA first.

The expense ratios of the funds available (2-plus %) are very high.

I agree that the choices are abysmal. Those fees are high and it's a sin.

However, I still believe that the tax advantaged status will overwhelm the fees and it will still be a good idea in the long run.

If nothing else, that money becomes useful if/when the OP moves jobs and can either roll that money into an IRA, or roll it into a new 401k with (hopefully) better fees and options.

In your case, I'd contribute to the 401k up to the maximum company match, then I'd max out an IRA. Then I'd put the rest into the 401k. Max it out if you can -- it'll still be worth it to fill that tax advantaged space.

HELP!! What is the best way to allocate my 401k?