young professional needs 401K & IRA tips, how to pick funds?

[Petunia 100]

This sounds good. Will have to do some reading later tonight.

Here's what I have so far for my potential portfolio:

Stock/Index Funds:

10% Technology Fund (FSCSX)
10% Foreign Large Blend (FSGDX)
10% Foreign Small Blend (FDIVX)
10% Domestic Large Cap (FUSVX)
10% Domestic Small Cap (FSSVX)
10% Domestic Mid Cap (FDVLX)

Bonds:
20% Intermediate Treasury Bond (FIBAX)
20% U.S. Bond Index Fund (FSITX)

Feedback is appreciated.

It's a decent portfolio. Looking just at the stocks, according to Morningstar Instant X-Ray, this gives you:

64% US stock
33% Foreign stock
3% cash

Style box:
15-19-27
5-6-5
7-7-9

With a weighted expense ratio of .44%.

Are you familiar with the style box? From left to right, it is value-blend-growth. From top to bottom, it is large-mid-small. It tells us that this particular stock portfolio is overweighting growth and small caps. That is fine if that is what you want to do, but you should be aware that this portfolio will be more volatile than a total market portfolio. You're taking on more risk, so should be rewarded with more return, but of course there is no guarantee.

For comparison purposes, a 2:1 weighting of Total Stock Market and Total Intl Market would give you:

65% US stock
33% Foreign stock
1% cash

Style box:
27-27-25
5-5-5
2-2-2

With a weighted expense ratio of .13%.

Do you see how your suggested portfolio is tilted towards large growth and small caps? That is what I mean by "overweighting"; it just means more than the market as a whole.

[lootpacman]

It's a decent portfolio. Looking just at the stocks, according to Morningstar Instant X-Ray, this gives you:

64% US stock
33% Foreign stock
3% cash

Style box:
15-19-27
5-6-5
7-7-9

With a weighted expense ratio of .44%.

Are you familiar with the style box? From left to right, it is value-blend-growth. From top to bottom, it is large-mid-small. It tells us that this particular stock portfolio is overweighting growth and small caps. That is fine if that is what you want to do, but you should be aware that this portfolio will be more volatile than a total market portfolio. You're taking on more risk, so should be rewarded with more return, but of course there is no guarantee.

For comparison purposes, a 2:1 weighting of Total Stock Market and Total Intl Market would give you:

65% US stock
33% Foreign stock
1% cash

Style box:
27-27-25
5-5-5
2-2-2

With a weighted expense ratio of .13%.

Do you see how your suggested portfolio is tilted towards large growth and small caps? That is what I mean by "overweighting"; it just means more than the market as a whole.

Oh wow, learning a lot with each post. This makes sense. I don't want to take too much risk, this is my first time with IRAs and 401Ks.

So based on this response, feh's 3-fund portfolio has a lower expense ratio which means I'm not overweighting. I am leaning towards the 60-40 Stocks-Bonds which was laid out by Jim_Ohio.

So far I've gotten:
1. 60-40 Stock-bonds split
2. 3-Fund portfolio (domestic, foreign & bonds)
3. Avoiding overweighted expense ratio by using Total Market funds

[feh]

Just completed reading abou the 3 fund portfolio. I like the approach, simple and straightforward.

As for the U.S. Bonds options, on your site I saw FBIDX and the one I chose is FSITX. The difference is that FBIDX has a better overall rating, the expense is still pretty small.

Any recommendations?

Not sure what you mean by "my site". I haven't pointed you at anything I've written.

Anyway, I'm not familiar w/ FBIDX. If you want to compare it to FSITX, you may want to do a search on bogleheads.org.

[Petunia 100]

Oh wow, learning a lot with each post. This makes sense. I don't want to take too much risk, this is my first time with IRAs and 401Ks.

So based on this response, feh's 3-fund portfolio has a lower expense ratio which means I'm not overweighting. I am leaning towards the 60-40 Stocks-Bonds which was laid out by Jim_Ohio.

So far I've gotten:
1. 60-40 Stock-bonds split
2. 3-Fund portfolio (domestic, foreign & bonds)
3. Avoiding overweighted expense ratio by using Total Market funds

I do the 3 fund portfolio myself. For a lot of years, I overweighted small value stocks. Now I'm 47, so no longer want the increased risk.

I didn't even check to see if you have a total US market stock fund available in your plan. If not, you can build your own with S & P 500 Index, Midcap Index, and Smallcap Index. If you hold them in 7/2/1 ratio, that is approximately the total US stock market.

[lootpacman]

Not sure what you mean by "my site". I haven't pointed you at anything I've written.

Anyway, I'm not familiar w/ FBIDX. If you want to compare it to FSITX, you may want to do a search on bogleheads.org.

oops, by your site I meant the bogleheads.org.

[lootpacman]

I do the 3 fund portfolio myself. For a lot of years, I overweighted small value stocks. Now I'm 47, so no longer want the increased risk.

I didn't even check to see if you have a total US market stock fund available in your plan. If not, you can build your own with S & P 500 Index, Midcap Index, and Smallcap Index. If you hold them in 7/2/1 ratio, that is approximately the total US stock market.

Petunia

These recommendations seem like total market funds and bond:
1. Spartan® Total Market Index Fund - Fidelity Advantage Class (FSTVX)
2. Spartan® Global ex U.S. Index Fund - Fidelity Advantage Class (FSGDX)
3. Spartan® U.S. Bond Index Fund - Fidelity Advantage Class (FSITX)

(4) alternative to #3 Fidelity® Total Bond Fund (FTBFX) (has a higher expense ratio)

[Petunia 100]

Petunia

These recommendations seem like total market funds and bond:
1. Spartan® Total Market Index Fund - Fidelity Advantage Class (FSTVX)
2. Spartan® Global ex U.S. Index Fund - Fidelity Advantage Class (FSGDX)
3. Spartan® U.S. Bond Index Fund - Fidelity Advantage Class (FSITX)

(4) alternative to #3 Fidelity® Total Bond Fund (FTBFX) (has a higher expense ratio)

Oh yes, those will do nicely. You are very fortunate to have such excellent choices in your employer plan. In my opinion, these three funds will make an excellent portfolio.

[lootpacman]

Oh yes, those will do nicely. You are very fortunate to have such excellent choices in your employer plan. In my opinion, these three funds will make an excellent portfolio.

This is actually for the IRA (rolled over from previous 401K) which isn't tied to my company. I take that I can still apply this strategy?

Company matches 16% of 401K, but the funds they seem to mention are:

1. FID FRDM INDX 2055 Fund (FDEWX) (a 100% percent is in this blended fund)
2. Fidelity Freedom Index 2060 Fund (FDKLX), this was recently added this month, haven't looked into it yet.

[Petunia 100]

This is actually for the IRA (rolled over from previous 401K) which isn't tied to my company. I take that I can still apply this strategy?

Company matches 16% of 401K, but the funds they seem to mention are:

1. FID FRDM INDX 2055 Fund (FDEWX) (a 100% percent is in this blended fund)
2. Fidelity Freedom Index 2060 Fund (FDKLX), this was recently added this month, haven't looked into it yet.

Oh, OK. Yes, it is still an excellent strategy.

The Fidelity Freedom Index funds are excellent, too. They are all the same fund, just at different points along the glide path. The "glide path" is the plan as to how the funds will change over time, and when. You can find out the specifics on Fidelity's website.

https://www.fidelity.com/mutual-funds/asset-allocation-funds/freedom-funds/how-we-manage

Note that Fidelity also offers Fidelity Freedom funds (no "Index" in the name) which use actively managed funds. These I personally would not use at all.

[lootpacman]

Oh, OK. Yes, it is still an excellent strategy.

The Fidelity Freedom Index funds are excellent, too. They are all the same fund, just at different points along the glide path. The "glide path" is the plan as to how the funds will change over time, and when. You can find out the specifics on Fidelity's website.

https://www.fidelity.com/mutual-funds/asset-allocation-funds/freedom-funds/how-we-manage

Note that Fidelity also offers Fidelity Freedom funds (no "Index" in the name) which use actively managed funds. These I personally would not use at all.

Update.

At the moment I can't use the 3-Fund portfolio. Didn't meet the minimum requirements of $2500 per investment (haven't had a IRA/401K for long).

The fidelity rep suggested the Fidelity Freedom 2055 Fund (FDEEX). Petunia I know you said you wouldn't use these funds at all (this is for my IRA).

For my 401K I'm currently using Fidelity Freedom Index 2055 Fund (FDEWX).

I did a comparison and I see that the no index fund has a higher expense ratio. What other factors do I need to consider?

[autoxer]

I would just use fdewx and keep adding to it until you have enough to split it up into the individual index funds.

Stay away from fdeex. The fidelity rep is probably instructed to recommend the funds that make more money for fidelity.

[lootpacman]

I would just use fdewx and keep adding to it until you have enough to split it up into the individual index funds.

Stay away from fdeex. The fidelity rep is probably instructed to recommend the funds that make more money for fidelity.

Darn, the thought crossed my mind. I will look into that tomorrow.