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It's kind of depressing. He puts about $1000 a month into his 401K from payroll deduction, but the balance sure doesn't increase $1000/month. It's like we are throwing away $1000/month. Maybe he's invested in the wrong things, or maybe it's the economy now, but before his company switched from Prudential to Great West Retirement Services, his 401K grew a lot and we were happy with it. Ever since switching to Great West, seems like his 401K is not increasing at all.
Here is what he is invested in:
Your current deposit allocations are:
Maxim T. Rowe Price Mid-Cap Growth 20%
Marsico Focus 20%
Guaranteed Portolio Fund 20%
Fidelity Advisor Leveraged Co Stk - T 20%
Ridgeworth Mid-Cap Value Equity I 20%
With Prudential, he did very well choosing funds on his own. But as I said, ever since switching to GWRS (which was in 2007, so maybe coincides with the economic downturn), seems like the money is just going into a sinking hole. You can elect to have your 401k managed for you by GWRS (for a fee), but would that really be any better?
These are the available investment options. Any suggestions?
Maxim Lifetime 2015 Portfolio II T1Lifetime
Maxim Lifetime 2025 Portfolio II T1Lifetime
Maxim Lifetime 2035 Portfolio II T1Lifetime
Maxim Lifetime 2045 Portfolio II T1Lifetime
Maxim Lifetime 2055 Portfolio II T1Lifetime
American Funds Capital World G/I R3International Funds
American Funds EuroPacific Growth R3International Funds
Thornburg International Value Fund R3International Funds
Alger Small Cap Growth Institutional ISmall Cap Funds
Columbia Small Cap Value I Fund ASmall Cap Funds
Maxim S&P SmallCap 600 Port Initial ClSmall Cap Funds
Fidelity Advisor Leveraged Co Stk - TMid Cap Funds
Maxim S&P Mid Cap 400 PortfolioMid Cap Funds
Maxim T. Rowe Price Mid-Cap GrowthMid Cap Funds
RidgeWorth Mid-Cap Value Equity IMid Cap Funds
American Funds Fundamental Inv R3Large Cap Funds
American Funds Growth Fund of Amer R3Large Cap Funds
Columbia Diversified Equity Income R3Large Cap Funds
Marsico FocusLarge Cap Funds
Maxim American Century Growth PortfolioLarge Cap Funds
Maxim S & P 500 IndexLarge Cap Funds
Maxim T. Rowe Price Equity IncomeLarge Cap Funds
Maxim Bond IndexBond Funds
Maxim Loomis Sayles Bond PortfolioBond Funds
Maxim US Government Mort SecsBond Funds
PIMCO Total Return AdminBond Funds
Guaranteed Portfolio FundFixed
It seems to me he has decent fund choices in his plan (not great, but ok). Pretty much everyone's 401k has gotten smacked since the end of 2007 (unless you were 100% in bonds/stable value/cash).
I do think his asset allocation is messed up, though. 40% in mid cap stocks. That's too much, in my opinion. I also think this portfolio is too volatile.
This is what I would do:
10% Maxim Loomis Sayles Bond
15% Maxim Bond Index
55% American Funds Capital World Growth & Income
10% Maxim S&P Mid Cap 400
10% Maxim S&P Small Cap 600
I would rebalanced these quarterly, although as infrequently as once a year would be okay. My 401k plan has an auto-rebalancing feature that I really like, so I recommend it if his plan has it.
Last edited by mysticaltyger; 06-30-2012 at 05:44 PM..
It seems to me he has decent fund choices in his plan (not great, but ok). Pretty much everyone's 401k has gotten smacked since the end of 2007 (unless you were 100% in bonds/stable value/cash).
I do think his asset allocation is messed up, though. 40% in mid cap stocks. That's too much, in my opinion. I also think this portfolio is too volatile.
This is what I would do:
10% Maxim Loomis Sayles Bond
15% Maxim Bond Index
55% American Funds Capital World Growth & Income
10% Maxim S&P Mid Cap 400
10% Maxim S&P Small Cap 600
I would rebalanced these quarterly, although as infrequently as once a year would be okay. My 401k plan has an auto-rebalancing feature that I really like, so I recommend it if his plan has it.
That American Fund is down 17% in the last year and has a huge load fee. It currently has more 50% invested outside of US. I would swap that out with the SP 500 index fund for 35% and then pick an equity international fund for the other 20%.
That said putting 100% into the appropriate target retirement date fund wouldn't be a bad idea for someone with limited investment knowledge.
Thanks for the comments. So what about the Fidelity Advisor Leveraged Co Stk - T? That's one of our favorites. Seems like we've had big gains with it at times (but I guess also big losses too). Those of you commenting wouldn't keep that fund? So far he's just stayed the course and kept those same choices through ups and downs, but definitely listening to suggestions. We have 15 to 20 years till retirement.
I don't know if you can have a 401k AND a separate Roth IRA?
If you can have a separate Roth IRA, then I would suggest opening one of those at an online broker like ETrade. With that account, you can invest in anything. You are not limited to mutual funds. You can buy individual stocks, individual bonds, or whatever. Divert some of your savings to that.
And there are companies dripping in cash which also issue bonds like Microsoft. They don't need to borrow money, but you can be pretty sure they will pay the bond off. You will only get maybe 3% or 4%, but that is MUCH better than the value dropping!
Anyway there are many very safe investment choices out there which will at least make you some money.
With a Roth, you pay taxes now, but don't have to pay taxes later.
As for the 401K, if the only choice is mutual funds and these are all losing money and racking up the fees, then I would check with other people in your company and see if they are dissatisfied as well. It is the money for all of you. Perhaps the company can change it so you have more investment options? Like buying individual bonds instead of a mutual fund?
Also a Roth 401k is better than a regular 401k. If your company decides to make changes, they should look into that as well.
And if you are losing money in whatever choices you have, another option is to just let the money sit there and don't invest in ANY of the mutual funds!
I took all my money out of equities and put 50% in bond funds and the rest in cash. Now A little about my self, I'm retired and manage all my own money. I spend 6-8 hours a day watching and reading financial news. Now about the world financial situation. We are hurting real bad. All the brokerage houses will all say the same thing "right now is the best time to invest" they say this because this is how they make money. For ten years I have been listening to the same thing in good times and bad. These people never change their sales pitch. So what ever a professional tells you, just let it roll right off of you.
If you are an investor, now is not the time to be in the markets, no volume, to much volatility, and a world on the brink of financial collapse. I expect that money can be made, but if you don't have the time to spend all day watching the news the best thing to do is to stop putting money into a 401K and instead put the money into a standard savings account. All of the big investors are out of the market and sitting on the sidelines waiting to get back in.
I know that the next few posts will say that this is bad information and that investing is the only way to make money. But when the markets are going down and the European situation getting worse by the min, right now the only place that makes sense is the dollar. This will change too.
A little about gold, large countries and large banks have been buying up gold for the last 10 years. When a bank gets in trouble they dump their gold on the market, which brings down the value. So as banks, and countries collapse, I expect gold to do the same.
I don't know if you can have a 401k AND a separate Roth IRA?
You can have both.
Quote:
Originally Posted by Billy_J
If you can have a separate Roth IRA, then I would suggest opening one of those at an online broker like ETrade. With that account, you can invest in anything. You are not limited to mutual funds. You can buy individual stocks, individual bonds, or whatever. Divert some of your savings to that.
Choose Fidelity, Vanguard or Schwab instead of ETrade.
Quote:
Originally Posted by Billy_J
And there are companies dripping in cash which also issue bonds like Microsoft. They don't need to borrow money, but you can be pretty sure they will pay the bond off. You will only get maybe 3% or 4%, but that is MUCH better than the value dropping!
Anyway there are many very safe investment choices out there which will at least make you some money.
With a Roth, you pay taxes now, but don't have to pay taxes later.
As for the 401K, if the only choice is mutual funds and these are all losing money and racking up the fees, then I would check with other people in your company and see if they are dissatisfied as well. It is the money for all of you. Perhaps the company can change it so you have more investment options? Like buying individual bonds instead of a mutual fund?
Also a Roth 401k is better than a regular 401k. If your company decides to make changes, they should look into that as well.
A Roth 401k is not necessarily better than a traditional 401k.
Quote:
Originally Posted by Billy_J
And if you are losing money in whatever choices you have, another option is to just let the money sit there and don't invest in ANY of the mutual funds!
It really doesnt matter what you think is going to be the outcome, odds are things not even on the radar will alter what looks like the obvious outcome.
The solution to uncertainty is to cover the right bases so you win even if your wrong.
Many investors go with bullet proofing strategies rather than growth strategies.
Gold if the dollar collapses,stocks if markets do well, long term treasuries for capital gains if we see recession,deflation or a flight to safety,cash for rebalancing when nothing is doing well.
Anyone who thinks they are going to time these moves has alot to learn about doing so.
While things can be different going forward the past 40 years have averaged over 9% a year cagr .
Betting only on one asset class can result in very long cycle times when things happen out of the norm such as we saw for equities.
Two back to back recessions destroyed stocks typical returns the last 12years.
What most folks called diversification really wasnt.
Corporate bonds take on all the risks of stocks when the crap hits the fan.
2008 saw corporate bonds plunge while treasury bonds soared.
Foreign markets and the us stock market plunged together.
Its not as much about the funds you own as its your overall portfolio and the asset classes you hold .
I took all my money out of equities and put 50% in bond funds and the rest in cash. Now A little about my self, I'm retired and manage all my own money. I spend 6-8 hours a day watching and reading financial news. Now about the world financial situation. We are hurting real bad. All the brokerage houses will all say the same thing "right now is the best time to invest" they say this because this is how they make money. For ten years I have been listening to the same thing in good times and bad. These people never change their sales pitch. So what ever a professional tells you, just let it roll right off of you.
If you are an investor, now is not the time to be in the markets, no volume, to much volatility, and a world on the brink of financial collapse. I expect that money can be made, but if you don't have the time to spend all day watching the news the best thing to do is to stop putting money into a 401K and instead put the money into a standard savings account. All of the big investors are out of the market and sitting on the sidelines waiting to get back in.
I know that the next few posts will say that this is bad information and that investing is the only way to make money. But when the markets are going down and the European situation getting worse by the min, right now the only place that makes sense is the dollar. This will change too.
A little about gold, large countries and large banks have been buying up gold for the last 10 years. When a bank gets in trouble they dump their gold on the market, which brings down the value. So as banks, and countries collapse, I expect gold to do the same.
Have you any idea how risky you are situated right now with only bonds and cash?
With little place for rates to go but up you are sitting on a powder keg.
An intermediate term bond fund can plunge 8-10% in a heartbeat with only a 1%
Rise in rates.couple that with the fact most folks have never seen a bond bear market before and it can be a real blood bath as they panic .
To you your playing it safe but the reality is bonds carry way more risk than stocks do right now.
If anything you want bond funds that arent very interest rate sensitive.
I like short term bond funds,floating rate bond funds and emerging market bond funds that are denominated in the us dollar and arent a currency play too.
High yield is ok too. Unless your doing one of the bullet proof models you really dont want the risk of anything going out more then 3-5 years in my opinion
.
Last edited by mathjak107; 07-01-2012 at 06:05 PM..
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