401k help

[John]

Hey guys looking for some advice here. I'm now able to invest in my groups 401k and I have a few questions. The plan offers some index funds as well as active funds. As for the index funds it offers SPY 500, vanguard mid cap index, vanguard small cap index, vanguard emerging markets, and vanguards total bond. There is also an option to open an individual Brokerage account for $200 a year. Do y'all think it would be worth opening the brokerage account or just sticking with those index funds?

[DMFA]

Depends on what asset allocation you need for your overall investing profile and what other holdings you have in other accounts.

No total stock means that *if* you'd want to mirror it (basically VTSAX or VTI), you'd have to bridge it between 500, mid, and small (80/10/10 would mirror VTSAX, basically, since VTSAX is 70/20/10 and the 500 is 86/14/0).  Of course, if you want greater tilt toward small caps, you could adjust it.

There's no total international index?  The only international exposure you can get is in emerging markets?  That's imperfect.

VBTLX/BND is probably fine for your bond needs if you don't want/need any international ones.

Seems suboptimal, but you could probably make it work, especially if you can use your other accounts to round out your overall port.  If you have more specific needs or wants, then I'd consider paying the $200/yr.

[The White Coat Investor]

John wrote:

Hey guys looking for some advice here. I’m now able to invest in my groups 401k and I have a few questions. The plan offers some index funds as well as active funds. As for the index funds it offers SPY 500, vanguard mid cap index, vanguard small cap index, vanguard emerging markets, and vanguards total bond. There is also an option to open an individual Brokerage account for $200 a year. Do y’all think it would be worth opening the brokerage account or just sticking with those index funds?

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I have a similar 401(k) and use the brokerage option to just buy Vanguard ETFs. But I either pay an AUM fee (~0.2%) or the $200 a year so I chose the $200 a year because it is cheaper.

[Bott1637]

When I first started I would have said do the brokerage but as time passes the benefits of simplification getting better and better. I'd do the options you have. The mid cap and small cap indexes are so closely correlated you can't tell them apparent so for me 500 and small cap plus the box fund is what I'd do. I'd then get total international in Roth or taxable accounts to fill whatever allocation you're going with. The brokerage option will allow more slice and dice but it will take more time to implement.

[jfoxcpacfp]

John wrote:

Hey guys looking for some advice here. I’m now able to invest in my groups 401k and I have a few questions. The plan offers some index funds as well as active funds. As for the index funds it offers SPY 500, vanguard mid cap index, vanguard small cap index, vanguard emerging markets, and vanguards total bond. There is also an option to open an individual Brokerage account for $200 a year. Do y’all think it would be worth opening the brokerage account or just sticking with those index funds?

Click to expand...

Since you are just now getting started and won't have much of an account for awhile, I'd stick with the choices offered. Like @DMFA, I'm surprised at the limited options, though. None of the bonds, choose either SC or MC (I would go with SC) and even allocation among all. When you have $40k - $50k, pay fhe $200/yr and rebalance into new choices.