401k: brokerage & portfolio selection

Google nooglr101
Feb 12 12 Comments

Which brokerage do you use: vanguard, or fidelity?

And, when you choose the investment portfolio how do you pick the selection, specially if you are a risk-averse person like me. Just to share, my current vanguard election has something like 90% equity + 10% bonds allocation, which was set by default for given age. I do understand age plays a big role, but how do suggest to educate oneself for a better decision maker regarding retire investment.

For context, I was reading this gle.com/amp/s/kkkk://www.cnbc.com/amp/2019/02/11/vanguard-cuts-expected-return-for-stock-market-over-the-next-decade.html, and overall looks like return going to shrink a lot in coming decade.

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TOP 12 Comments
  • Google / Product dzjc02
    Vanguard has lower costs generally and is structured such that the clients are the owners. Would recommend reading up on Bogle.
    Feb 12 2
    • Intel sales_bro
      Agree with this. Buy 2 books: bogleheads guide to investing; a simple path to wealth by JL Collins. Both are vanguard low cost index fund oriented books. Simple easy reads. FWIW my 401k is fidelity all personal taxable funds are vanguard, and mostly in VTSAX. If you're under 50 and more than a decade from retirement, you should be stock dominant. You want your money to grow and work for you (magic of compounding interest), bonds and CDs etc wont do that for you, or even beat inflation.
      Feb 12
    • Google nooglr101
      OP
      Thanks for the references. I definitely need some good reads to have bit fundamental understanding.
      Feb 12
  • Yahoo / Eng TC or GTF0
    I’m 31 and use fidelity for my 401k and vanguard for my Roth IRA.
    401k is about 85% stock 15% bond
    Ira is 80% stock 20% bond
    Regardless of what you use, you should buy the low expense ratio funds.
    Those target date funds are nice if you don’t want to think about the account, but they usually have an expense ratio which is a lot higher than passive funds. Over 30-40 years that expensive ratio could cost you tens of thousands of dollars.
    Feb 12 1
    • Google nooglr101
      OP
      Good tips! How do you compare regarding expense ratio and return? Also, how to compare:

      - domestic stocks
      - international stocks
      - bonds
      - mutual funds
      - index funds etc etc.
      Feb 12
  • New h5n1
    The majority of your portfolio should be domestic stocks. At least 50% if not more.

    All else is added to reduce volatility. Meaning, stuff that might go up when domestic stocks go down, or at least not go down by the same amount. This reduces volatility while largely maintaining your return. So you mix in small amounts.

    The biggest factor to mix in are bonds, which stay pretty flat.

    After that you can look at international and emerging stocks.

    A typical portfolio:

    60% domestic stocks (VTI ETF)
    20% bonds (BND ETF)
    20% foreign stocks (VXUS ETF)

    You could also just do

    80% stocks, all world (VT ETF)
    20% bonds (BND ETF)

    You could split the domestic portion into large cap (s&p 500), small cap, and value stocks. You could split the international into developed and emerging markets. Going heavier on small cap, value, and emerging stocks may get a higher return in exchange for higher risk. Still keep the majority in s&p500 if you do that. Maybe 30% s&p, 15% small and 15% value is as aggressive as you should go.

    If you are a risk taker and relatively young you could reduce the BND portion, potentially to zero. It should be back to 20% by the time you are 50, and perhaps to 40% by the time you are 65.

    If you want to make it dead simple and let professionals decide the right mix buy the Vanguard target retirement fund for the year you plan to stop working and they will invest in the right mix of VT and BND for your age.
    Feb 12 0
  • Apple
    Onsjsm

    Apple

    PRE
    Intuit
    BIO
    Engineering, devops,AI,database
    Onsjsmmore
    Is too many funds bad as they must be taking months fees ?
    Feb 12 1
    • New h5n1
      They take a percent so focus on picking funds with low management fee (indexes from vanguard, iShares, state street). Never put money in a fund that has an upfront charge.
      Feb 12
  • Veritas MhiC78
    Check out Unshakable book by Peter Mallouk & T Robbins ... guides you to avoid ridiculous unscrupulous mutual fund fees that seriously cost you, and helps determine your risk level, Vanguard is great for a % but you may need more or less risk depending on age, etc. Lastly only work with an advisor who can prove they are licensed fiduciary - most investment advisers are not. A licensed fiduciary must put your needs/best interest ahead of theirs ... most money advisors do make recommendations that cost you fees and they are paid on back end to recommend. It pays to do your home work here. Peter Mallouk has the best long term track record so his advice is solid.
    Feb 12 0
  • New h5n1
    Vanguard
    Feb 12 0
  • Microsoft / Product
    Brazuka

    Microsoft Product

    PRE
    Bain & Company
    Brazukamore
    Remember this is a retirement account. If you're young you should invest in an aggressive portfolio and phase it to more conservative only after 45-50.
    Feb 12 0
  • New / Eng sparked
    I would start by taking a look at the most common types on investments

    Large cap
    Small cap
    International (large/small)
    Bonds
    Etc.

    Understand how they vary both in returns and in risk/volitility

    Essentially there are Target date index funds that based on your expected retirement age manage a portfolio of the above different investment vehicles where the further you are from retirement the more weighted towards riskier investments they are and as you start to approach retirement age they rebalance until they are majority safe investments
    Feb 12 0

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