New job, but clueless on 401K

**jIM_Ohio** · 11-16-2007, 12:03 PM

You have good choices. How old and aggressive are you with this? If you lose 50% in a week, are you going to come back and curse me?

Good funds:

FLSTX
MXTEI
RERCX
FMCAX

agressive:
45% MXTEI
15% FMCAX
15% FLSTX
25% RERCX

Moderate
30% MXTEI
10% FMCAX
10% FLSTX
25% RERCX
15% Maxim Bond index
10% PTRAX

not so sure on bond funds, but I think that Pimco one is ran by Bill Gross.

I own the T Rowe Price equity income and have close to 45% of my retirement funds in that mutual fund.
My wife has 25% of her 401k in the American Funds Europacific fund
The fidelity leveraged stock fund is popular (I have seen it on searches for a small cap fund)
The PIMCO bond fund is also popular.

**98tegRS** · 11-16-2007, 12:39 PM

I'm 24...25 in dec

i won't curse you if i loose 50%
i might be upset

but i'll get over it...i have lots of time to learn.

**jIM_Ohio** · 11-16-2007, 12:45 PM

Originally posted by 98tegRS View Post

I'm 24...25 in dec

i won't curse you if i loose 50%
i might be upset

but i'll get over it...i have lots of time to learn.

Age 24, you are young, and with time being the biggest single compounding factor, I would suggest an aggressive strategy.

It's possible the aggressive selection above could lose 50% in a given year (not likely, but possible). It's also possible for something like the aggressive side to net 10-25% returns more than once or twice every 5 years.

I always say swing for the fences as much as possible. Gains early compound over time significantly.

**kv968** · 11-16-2007, 01:48 PM

I would say, since not you're getting any matching company funds, to instead max out an IRA, if you can, before you fund the 401k. There are some good funds in there as Jim pointed out but you really have to watch what type classes they are and if they carry a load or higher expense ratio than you can get elsewhere. For example, the Fidelity Advisor Leveraged Co Stk - T (FLSTX) has a 3.5% load and a 1.39% expense ratio in your 401k. You could get that fund (FLVCX) directly through Fidelity in an IRA with no load and a 0.83% expense ratio. Not all the funds you listed have loads, although I don't know what those Maxim funds charge, but just keep an eye on the fees and loads.

**puck36** · 11-16-2007, 01:54 PM

What I did was I took my 401k information to my bank (WellsFargo) and had my guy there look it all over and tell me what I should pick. I am glad that I did what he said because the last 2 years I have been making over 18% each year in the 401k.

**humandraydel** · 11-16-2007, 07:02 PM

Originally posted by 98tegRS View Post

I have so many options and don't know what to choose...any help would appreciated

This is easy!

30% MSCI EAFE Index
15% Russell 2000 Index
15% S&P Midcap 400 Index
30% S&P 500 Index
10% Lehman Brothers Aggregate Bond Index or PIMCO Total Return

No match isn't great, but at least you have good index funds! By the way, what is the expense ratio on the funds? I assume the index funds are low expense ratios.

**98tegRS** · 11-19-2007, 06:21 AM

The index funds does not seem to have an expense ratio. i've included the link that shows the details on the various options.

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https://docs.retirementpartner.com/ioag/934909-01_IOAG.pdf

**humandraydel** · 11-19-2007, 01:22 PM

Oh, I see what's going on - the index funds aren't actually an option to invest in - they are just including them so you can compare the mutual fund returns to an appropriate index. So, I'd go with something like this:

30% American Funds EuroPacific Growth
15% Maxim Index 600 (small cap index)
15% Fidelity Advisor Mid Cap
30% Maxim S&P 500 Index
10% PIMCO Total Return

**kv968** · 11-19-2007, 02:41 PM

I still say open and max out an IRA if you can before contributing to the 401k. Those expense ratios and fees are higher than what you would get for the same funds through an IRA.

**am_vanquish** · 11-19-2007, 03:19 PM

Originally posted by kv968 View Post

I still say open and max out an IRA if you can before contributing to the 401k. Those expense ratios and fees are higher than what you would get for the same funds through an IRA.

I really agree with this advice. Not only will you save on the expense ratios, there are many tax advantages to the Roth IRA that you'll miss with the 401k (but will make you very happy when you finally begin withdrawals!) Also, you don't have to worry about whether or not to roll over the 401k if you leave this job in a few years, which is not an issue with the IRA (key word: INDIVIDUAL)!!

P.S. Congrats on the new job

and keep up the financial diligence!!!

**98tegRS** · 11-20-2007, 06:10 AM

Thanks for the advice, I really appreciate it. I'm looking to open an IRA as well. I still have my old 401K at my last employer, valued at a little over $2500...i started contributing about 1 year ago, but not much. I'm going to do a rollover, but i have not decided on which company to rollover to (Fidelity, T Rowe, Scottrade). I really want to open a Roth IRA, but from my understanding, I cant do that with a rollover from a 401k.

**Scanner** · 11-20-2007, 07:26 AM

I agree also with going with a Roth IRA and choosing a lower expensed fund.

Unfortunately, funds through companies (401k's) often tend to suck with expense ratios and loads.

I'd write human resources an anonymous letter letting them know why you don't invest in their 401(k) - 1. They don't match anything and 2. You give a littany of sucky funds to choose from.

BTW, I didn't know Maxim magazine did mutual funds. I may have to look into those

**disneysteve** · 11-20-2007, 08:54 AM

Originally posted by 98tegRS View Post

I have so many options and don't know what to choose

I think this is a great point. Why do 401K plans feel they need to flood employees with choices. Research has repeatedly shown that when people have more and more choices, they are less and less able to make a decision, often resulting in them doing nothing, for fear of making the wrong choice.

Why can't they make 401K plans simple? Have a large company index fund, a small company index fund, an international index fund, a bond index fund and maybe a few actively managed sector funds for people who want to gamble a bit more. I think the participation rate would be a lot higher if they made the process simpler. To someone who isn't a personal finance junkie like all of us, seeing a list like the one in the OP would scare them away.

**InDebtInDC** · 11-20-2007, 10:26 AM

Originally posted by disneysteve View Post

I think this is a great point. Why do 401K plans feel they need to flood employees with choices. Research has repeatedly shown that when people have more and more choices, they are less and less able to make a decision, often resulting in them doing nothing, for fear of making the wrong choice.

Why can't they make 401K plans simple? Have a large company index fund, a small company index fund, an international index fund, a bond index fund and maybe a few actively managed sector funds for people who want to gamble a bit more. I think the participation rate would be a lot higher if they made the process simpler. To someone who isn't a personal finance junkie like all of us, seeing a list like the one in the OP would scare them away.

I am limited to that at work, and I wish I had more choices. But I agree that most people shouldn't be given so many choices.

My only option is to take it out of the work account.

New job, but clueless on 401K