401k advice

[Ryan410]

i will be enrolling in my employers 401k program for the first time and i am seeking advice on where i should make my elections. Employers offers 50% match on 6%, i will be contributing 6%. I am 21 years old with $0 saved for retirement at this point.

options:

Morley Stable Value Inst
Sit U.S. Govt Securities
PIMCO Total Return Admin
Fidelity Balanced
Oakmark Equity & Income I
Ameristock
Weitz Partners Value
Selected American Shares S
Fairholme 1
Fidelity Spartan 500 Idx Inv
Fidelity Capital Appr
MainStay Large Cap Growth I
Columbia Mid Cap Index Z
Columbia Acorn Z
Artisan Mid Cap Inv
Royce Low Priced Stock Svc
Oppenheimer Global A
Artisan International Inv 1
Oppenheimer Develop Mkts A

EDIT: Just realised I posted this in the wrong section...sorry.

[krantcents]

i will be enrolling in my employers 401k program for the first time and i am seeking advice on where i should make my elections. Employers offers 50% match on 6%, i will be contributing 6%. I am 21 years old with $0 saved for retirement at this point.

options:

Morley Stable Value Inst
Sit U.S. Govt Securities
PIMCO Total Return Admin
Fidelity Balanced
Oakmark Equity & Income I
Ameristock
Weitz Partners Value
Selected American Shares S
Fairholme 1
Fidelity Spartan 500 Idx Inv
Fidelity Capital Appr
MainStay Large Cap Growth I
Columbia Mid Cap Index Z
Columbia Acorn Z
Artisan Mid Cap Inv
Royce Low Priced Stock Svc
Oppenheimer Global A
Artisan International Inv 1
Oppenheimer Develop Mkts A

EDIT: Just realised I posted this in the wrong section...sorry.

As a 21 year old, you should consider some risk. I would review each of your investment choices consistent (at least 5 years) growth exceeding their index with low expenses. Create or chose an asset allocation that you are comfortable. Periodically (quarterly & annually) monitor your choices and adjust. Good luck.

[jIM_Ohio]

Take a step back. Before you choose funds, find out how much risk you want to take. If you know about risks, picking funds is easy.


Examples of risk and how to measure it:

If you invest money and the $5000 you invested last year is $2500 now, what would you do?

If you invest money and the $5000 you invested last year is now $7500, what would you do?


If you were to educate yourself more, would you change the behaviors above, or would you do your own thing, regardless of the advice you receive from friends, the internet, and/or an advisor?



The single biggest thing with risk and picking investments is to analyze your expected behavior and prevent bad behavior. You don't need excellent decision making skills... you just need to avoid bad decisions. Bad decision is buy high, sell low. If you would sell in first question above or buy in second example above, you are buying high, selling low, so learn about risk, then make decisions.


Risk is USUALLY expressed in terms of % stocks and % bonds. Like 80-20 or 40-60. Meaning 80% stocks and 20% bonds or 40% stocks and 60% bonds.

Each of those portfolios has a certain amount of risk to it... 80-20 is more risk with higher EXPECTED return, but the change in values (from day to day, month to month and year to year) will be high. Might be $5000 one day, $2500 a year later, then $7500 two years later. You need to decide if you will react to those changes (if you do react, then don't do bad behavior, and if you do react, you might want to lower risk some to prevent the bad behavior to begin with).

[Ryan410]

thanks for the quick responses. Currently I feel that I can accept moderate risk at this point in time. I like to educate myself before i jump into things with nearly all aspects of my life and in order to take more risk, i feel the need to have more knowledge. At this stage of the game i dont make a ton of money and i want to make every dollar count. obviously every investment has a risk but I dont see myself jumping into a position where i could loose half of my retirement fund.

hope that helps.

[jIM_Ohio]

thanks for the quick responses. Currently I feel that I can accept moderate risk at this point in time. I like to educate myself before i jump into things with nearly all aspects of my life and in order to take more risk, i feel the need to have more knowledge. At this stage of the game i dont make a ton of money and i want to make every dollar count. obviously every investment has a risk but I dont see myself jumping into a position where i could loose half of my retirement fund.

hope that helps.

Pick a fund which is about 25% stocks and 75% bonds/cash

something like this

Morley Stable Value Inst 25%
Sit U.S. Govt Securities 50%
PIMCO Total Return Admin
Fidelity Balanced
Oakmark Equity & Income I
Ameristock
Weitz Partners Value
Selected American Shares S
Fairholme 1
Fidelity Spartan 500 Idx Inv 5%
Fidelity Capital Appr
MainStay Large Cap Growth I
Columbia Mid Cap Index Z 5%
Columbia Acorn Z
Artisan Mid Cap Inv
Royce Low Priced Stock Svc 5%
Oppenheimer Global A
Artisan International Inv 1 5%
Oppenheimer Develop Mkts A 5%

Those choices are 25% stock and 75% bonds/cash

5% into large cap

Fidelity Spartan 500 Idx Inv 5%

5% into mid cap

Columbia Mid Cap Index Z 5%

5% into small cap

Royce Low Priced Stock Svc 5%

that is 15% domestic stock

5% into foreign large cap

Artisan International Inv 1 5%

5% into foreign emerging markets

Oppenheimer Develop Mkts A 5%

that is 10% foreign stock
total of 25% equity

50% bonds

Sit U.S. Govt Securities 50%

The PIMCO selection might be a bond fund too, if it is 100% bonds, consider taking this 50% and moving some or all of it there.


25% cash

Morley Stable Value Inst 25%

If you decide to take more risk, move the cash position into equities and you would be 50% stocks and 50% bonds on that one decision right there.


DO NOT let anyone tell you to take more risk than you are comfortable with. The best way to progress towards retirement is 3 things

1) spend less than you earn every day, month and year.
2) set aside money every pay period (suggest you look at the 6% contribution and try to get 15-20% to retirement accounts, 6% will NOT be enough to retire on in 50 years).
3) Be mindful of all financial decisions, avoid making decisions which impact net worth in a negative way long term. Meaning do not buy too much house, too much car, or buy high sell low.

Part of #3 is do not watch account balances every day or even every month... just set it and forget it, and try to take emotion out of the decisions.

[dczech09]

I agree with everything said. As Jim stated, do not let anyone tell you to take more risk than you are comfortable with. If you take more risk (or less risk) than you are comfortable with, you will likely make stupid investment decisions in the future such as buying high and selling low.

It is human nature to want to sell when you see the market tank, and it is human nature to want to buy when you see the market rally. Remember that making money as an investor is about being IN the market when changes occur, not entering the market when changes occur. Set up a portfolio that you are comfortable with and LEAVE IT ALONE. Do not sell shares; if anything, you should systematically invest more money over time.

[Ryan410]

i would feel pretty comfortable at 50/50 split. im not against risk but i like to be informed when making those choices, and at the moment i am not at that point... ther is so much info out there its hard to focus in on one thing...

thanks for the suggestions, im going to do some more reading on those options.

[Snodog]

Tolerable Loss * 2 = Equity Allocation

Just a rule of thumb, YMMV.

[jIM_Ohio]

i would feel pretty comfortable at 50/50 split. im not against risk but i like to be informed when making those choices, and at the moment i am not at that point... ther is so much info out there its hard to focus in on one thing...

thanks for the suggestions, im going to do some more reading on those options.

50-50 is not what I would term moderate... it is how I invest my kids 529 monies. Rebalancing it is easy... I would do 10% to each equity class, then 25% bonds and 25% cash with the remainder.

Morley Stable Value Inst 25%
Sit U.S. Govt Securities 25%
PIMCO Total Return Admin
Fidelity Balanced
Oakmark Equity & Income I
Ameristock
Weitz Partners Value
Selected American Shares S
Fairholme 1
Fidelity Spartan 500 Idx Inv 10%
Fidelity Capital Appr
MainStay Large Cap Growth I
Columbia Mid Cap Index Z 10%
Columbia Acorn Z
Artisan Mid Cap Inv
Royce Low Priced Stock Svc 10%
Oppenheimer Global A
Artisan International Inv 1 10%
Oppenheimer Develop Mkts A 10%

[Drac]

Being as young as you are, 21, you can take a lot of risk. Keep in mind that you will not be able to touch the money in your 401K until you retire. If you buy 700 shares $5,000 in stock and a year later is down to $2,500, you have to remember that you still have the 700 shares, and you don't loose the money until you sell (at retirement). In addition, the dividends from the stock will be reinvested to buy more shares at a lower price. In other words, don't be afraid of taking risk because you have a lot of time for the market to recover and grow.
One more advice will be to monitor your 401K investments a few times a year, but do not look at it every week. This is a long term investment, jus choose a good combination or quality mutual funds with low expenses rate and keep investing money regularly every month, let the power of the compound interest work for you. In a few years you will be happy you did.
You are doing the right thing on starting saving for retirement at 21. Congratulations, way to go.