How to Allocate 401K Funds?

[cologero]

Hello everyone,

I'm 37 years old and just starting a 401K with my employer. To play catch-up, I'm going to contribute $800 per month and my employer will be adding another $200 (so a total of $1,000 per month will be contributed).

I have no idea how to allocate my funds as I'm very new to this. Can someone give me a quick "crash course?" I've also attached a screen shot of the available options and would like some recommendations. I appreciate any feedback you all can give me. Have a great Tuesday everyone!

[cologero]

Hmmm, not sure if I'm just not seeing it, but it looks like my attachment is missing. Let me try attaching it again here.

[cologero]

Can't seem to get my attachment to show up so I'll just list out my options:

BALANCED:
FRANKLIN INCOME R

CASH EQUIVALENT:
INVESCO CASH RESERVES A

EQUITY:
AMERICAN FUNDS EUROPACIFIC R2
BLACKROCK INTL OPPORTUNITIES A
COLUMBIA MARSICO GROWTH A
COLUMBIA MID CAP A
INVESCO SELECT COMPANIES A
KEELEY SMALL CAP VALUE A
MUTUAL GLOBAL DISCOVERY C
OPP DEVELOPING MARKETS N
PIONEER DISCIPLINED VALUE C
THORNBURG CORE GROWTH R3

FIXED INCOME:
INVESCO CORE PLUS BOND A
INV LIMITED MATURE TREASURY A
PIONEER GLOBAL HIGH YIELD C
TEMPLETON GLOBAL BOND C

OTHER:
AGGRESSIVE MODEL
GROWTH AND INCOME MODEL
GROWTH MODEL
INCOME MODEL

[feh]

You should do some reading first: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

[jIM_Ohio]

Can't seem to get my attachment to show up so I'll just list out my options:

BALANCED:
FRANKLIN INCOME R

CASH EQUIVALENT:
INVESCO CASH RESERVES A

EQUITY:
AMERICAN FUNDS EUROPACIFIC R2
BLACKROCK INTL OPPORTUNITIES A
COLUMBIA MARSICO GROWTH A
COLUMBIA MID CAP A
INVESCO SELECT COMPANIES A
KEELEY SMALL CAP VALUE A
MUTUAL GLOBAL DISCOVERY C
OPP DEVELOPING MARKETS N
PIONEER DISCIPLINED VALUE C
THORNBURG CORE GROWTH R3

FIXED INCOME:
INVESCO CORE PLUS BOND A
INV LIMITED MATURE TREASURY A
PIONEER GLOBAL HIGH YIELD C
TEMPLETON GLOBAL BOND C

OTHER:
AGGRESSIVE MODEL
GROWTH AND INCOME MODEL
GROWTH MODEL
INCOME MODEL

Crash course, go 60-40 (60% stocks, 40% bonds)
put 12% each into the green ones
put 10% each into the orange ones

That will be 60-40 and is a good place to begin learning

Eventually you should learn what 60-40 is, and be able to answer should you be 80-20, 60-40 or 40-60.
Eventually you should learn if I suggested large caps, small caps or foreign stocks for you
Eventually you should learn if the bonds are government, foreign or corporate in my suggestions
You should also ask if you are paying sales charges to someone which could be giving you similar information

[cologero]

Crash course, go 60-40 (60% stocks, 40% bonds)
put 12% each into the green ones
put 10% each into the orange ones

That will be 60-40 and is a good place to begin learning

Eventually you should learn what 60-40 is, and be able to answer should you be 80-20, 60-40 or 40-60.
Eventually you should learn if I suggested large caps, small caps or foreign stocks for you
Eventually you should learn if the bonds are government, foreign or corporate in my suggestions
You should also ask if you are paying sales charges to someone which could be giving you similar information

Thank you! This is what I was looking for. So you feel this is a good fairly safe starting point to go with until I study up on some of the items mentioned?

[soogar]

I don't think you should split your 401(k) between so many funds. The funds charge fees as well and you don't have a lot of money in your 401 (k) yet. Maybe pick one stock fund and one bond fund for now and as your money grows, allocate some to a third fund. Or three funds off the bat. The Franklin income fund seems like a fairly safe choice so maybe you can do that fund in lieu of a bond fund for a little more growth.

I just want to add I'm not specifically recommending the Franklin FUnd over others because I haven't seen the other funds or looked at their prospectuses.

And you don't necessarily have to make a choice now - at least I didn't when I did my 401(k). Maybe you can wait and research your funds a little more while they take out your contributions. YOu can always change them later on but depending on your company's policy there may be fees involved so it is better that you make an informed decision.

[cologero]

And you don't necessarily have to make a choice now - at least I didn't when I did my 401(k). Maybe you can wait and research your funds a little more while they take out your contributions. YOu can always change them later on but depending on your company's policy there may be fees involved so it is better that you make an informed decision.

Not sure of fees yet, but the website is making me pick these allocations now before I can continue my enrollment.

[snafu]

Adding to the information already offered...you need to consider your risk tolerance. Both the Bond market and the Equity [stock] market rise and fall on emotion of their buyers and sellers. How will you feel when some statements show gains in value from your original contributions and some months the statements will show decreases. You need to be able to sleep at night without fretting over the numbers on those bad days.

I'm not familiar with the specific Mutual Funds listed but you need to check their Management Expense Ratio [MER] they are the fees charged but not specifically shown. Also, I didn't see anything called a Dividend Fund. Let us know what you decide

[soogar]

Not sure of fees yet, but the website is making me pick these allocations now before I can continue my enrollment.

Maybe you can choose the cash equivalent option for now and then change it later. I think you should call up the administrator of the plan and find out more about the fees and whether you can change your allocations later on, and also whether you would have to hold an investment for a certain period of time before selling without a penalty. I know for my Roth, lots of funds have 90 day requirement to stay in the investment (no fees no loads) and then they assess a fee if you want to sell before the 90 day period.

They assess this fee to discourage people from rapidly shifting money in and out of the mutual fund. That's why you need a little more time to review those funds before makings a commitment though it's not the end of the world if you want to change your fund if you don't like it.

[jIM_Ohio]

I don't think you should split your 401(k) between so many funds. The funds charge fees as well and you don't have a lot of money in your 401 (k) yet. Maybe pick one stock fund and one bond fund for now and as your money grows, allocate some to a third fund. Or three funds off the bat. The Franklin income fund seems like a fairly safe choice so maybe you can do that fund in lieu of a bond fund for a little more growth.

I just want to add I'm not specifically recommending the Franklin FUnd over others because I haven't seen the other funds or looked at their prospectuses.

And you don't necessarily have to make a choice now - at least I didn't when I did my 401(k). Maybe you can wait and research your funds a little more while they take out your contributions. YOu can always change them later on but depending on your company's policy there may be fees involved so it is better that you make an informed decision.

The fees would be similar whether 100% went to one fund or 9 funds had about 11% each. It is more important to have a good allocation than low fees.

[soogar]

The fees would be similar whether 100% went to one fund or 9 funds had about 11% each. It is more important to have a good allocation than low fees.

There is already an allocation within a fund, and that's assuming they all have the same expenses. Fewer funds means that OP can buy more shares with the contributions and see more growth.

I also think it depends on how long OP wants to stay at his job and whether OP may want to roll that fund over fairly soon.

[kv968]

Hello everyone,

I'm 37 years old and just starting a 401K with my employer. To play catch-up, I'm going to contribute $800 per month and my employer will be adding another $200 (so a total of $1,000 per month will be contributed).

What I would do is see what your employer match is based off of. Is it a percentage of the amount you put in or is it more or less a set amount? A 25% match is great but if that's just an amount they would put in whether you invested $800 or $500 I'd check that out.

Reason being, the funds you have to pick from are horrible expense-wise. And if you didn't have to put all of that money in the 401k to get that match, I'd say you'd be better off putting whatever you don't have to in a ROTH IRA instead where you can choose from funds that are much less expensive and have more choices.

Either way, I'd see if those funds with the "A" class share after them have the loads waived.

[jIM_Ohio]

There is already an allocation within a fund, and that's assuming they all have the same expenses. Fewer funds means that OP can buy more shares with the contributions and see more growth.

I also think it depends on how long OP wants to stay at his job and whether OP may want to roll that fund over fairly soon.

Do you really believe this?

Whether 10 funds or 1 fund, the account balance would be the same, and its not the number of shares, its the risk of the whole portfolio.

[soogar]

What I would do is see what your employer match is based off of. Is it a percentage of the amount you put in or is it more or less a set amount? A 25% match is great but if that's just an amount they would put in whether you invested $800 or $500 I'd check that out.

Reason being, the funds you have to pick from are horrible expense-wise. And if you didn't have to put all of that money in the 401k to get that match, I'd say you'd be better off putting whatever you don't have to in a ROTH IRA instead where you can choose from funds that are much less expensive and have more choices.

Either way, I'd see if those funds with the "A" class share after them have the loads waived.

I think that having the opportunity to put away money pre-tax is better than not having it, even if the funds are not so great and there is no employer match. It was much easier for me to save money in a 401(k) before I got paid than it is for me to put money away after taxes in a Roth IRA.