I am DEFINITELY being robbed!

[NutADuc]

Hi guys,

After looking at my job's 401k asset allocation and expenses paid, I realized I am being robbed!! Right now I am in the Fidelity Freedom 2055 that has an expense ratio of 0.75%. It's funny how I had been hearing about fees and being told to watch out for those and how you can get duped on those, and today I decided to look at things a bit closer and realized I was paying too much in fees.

Now the other funds that are available to me with the lowest fees are Vanguard Institutional Index at 0.04%, Vanguard EXT Market Index-ADM at 0.08%, Vanguard Total INTL STK Indx-Adm at 0.11%, and Vanguard TOT Bond Mkt Index-ADM. I want/need to sell the Fidelity 2055 and allocate the funds (worth 26.7K vested, 28K total) to these different Vanguard funds in a 90/10 split. It looks like I do not have Vanguard total stock market Index fund available to me.

What do you guys think? Is there anything else I am missing as far as questions to ask before trading? Do I have enough funds to buy into all these funds?

Thanks

[Lithium]

Most 401k's do not require a minimum to invest in their options.  So I don't see any reason it wouldn't work.  You may have a self-directed brokerage option that has even more low-cost options, but check on associated fees before using it.

[Zaphod]

NutADuc wrote:

Hi guys,

After looking at my job’s 401k asset allocation and expenses paid, I realized I am being robbed!! Right now I am in the Fidelity Freedom 2055 that has an expense ratio of 0.75%. It’s funny how I had been hearing about fees and being told to watch out for those and how you can get duped on those, and today I decided to look at things a bit closer and realized I was paying too much in fees.

Now the other funds that are available to me with the lowest fees are Vanguard Institutional Index at 0.04%, Vanguard EXT Market Index-ADM at 0.08%, Vanguard Total INTL STK Indx-Adm at 0.11%, and Vanguard TOT Bond Mkt Index-ADM. I want/need to sell the Fidelity 2055 and allocate the funds (worth 26.7K vested, 28K total) to these different Vanguard funds in a 90/10 split. It looks like I do not have Vanguard total stock market Index fund available to me.

What do you guys think? Is there anything else I am missing as far as questions to ask before trading? Do I have enough funds to buy into all these funds?

Thanks

Click to expand...

Its a good plan. Those vanguard funds should basically cover VTI, I wouldnt worry about it.

[NutADuc]

@Lithium and @Zaphod, thank you both. I will make the trades.

[The White Coat Investor]

NutADuc wrote:

Hi guys,

After looking at my job’s 401k asset allocation and expenses paid, I realized I am being robbed!! Right now I am in the Fidelity Freedom 2055 that has an expense ratio of 0.75%. It’s funny how I had been hearing about fees and being told to watch out for those and how you can get duped on those, and today I decided to look at things a bit closer and realized I was paying too much in fees.

Now the other funds that are available to me with the lowest fees are Vanguard Institutional Index at 0.04%, Vanguard EXT Market Index-ADM at 0.08%, Vanguard Total INTL STK Indx-Adm at 0.11%, and Vanguard TOT Bond Mkt Index-ADM. I want/need to sell the Fidelity 2055 and allocate the funds (worth 26.7K vested, 28K total) to these different Vanguard funds in a 90/10 split. It looks like I do not have Vanguard total stock market Index fund available to me.

What do you guys think? Is there anything else I am missing as far as questions to ask before trading? Do I have enough funds to buy into all these funds?

Thanks

Click to expand...

Welcome to the club. We've all been there.

[NutADuc]

Also, I chose to rebalance once a year and it does it automatically. I don't have the confidence to do it myself. Is that alright?

[The White Coat Investor]

NutADuc wrote:

Also, I chose to rebalance once a year and it does it automatically. I don’t have the confidence to do it myself. Is that alright?

Click to expand...

Is it all right to rebalance automatically once a year? Yes, probably preferable. Is it all right not to have the confidence to do it yourself if necessary? No. The math isn't particularly difficult, nor is putting in the orders. I'll bet a year from now you DO have the confidence to do it yourself.

[DMFA]

NutADuc wrote:

Hi guys,

After looking at my job’s 401k asset allocation and expenses paid, I realized I am being robbed!! Right now I am in the Fidelity Freedom 2055 that has an expense ratio of 0.75%. It’s funny how I had been hearing about fees and being told to watch out for those and how you can get duped on those, and today I decided to look at things a bit closer and realized I was paying too much in fees.

Now the other funds that are available to me with the lowest fees are Vanguard Institutional Index at 0.04%, Vanguard EXT Market Index-ADM at 0.08%, Vanguard Total INTL STK Indx-Adm at 0.11%, and Vanguard TOT Bond Mkt Index-ADM. I want/need to sell the Fidelity 2055 and allocate the funds (worth 26.7K vested, 28K total) to these different Vanguard funds in a 90/10 split. It looks like I do not have Vanguard total stock market Index fund available to me.

What do you guys think? Is there anything else I am missing as far as questions to ask before trading? Do I have enough funds to buy into all these funds?

Thanks

Click to expand...

If you want to re-create Fido Freedom 2055 (FDEEX), then do the following:

• 44% Vanguard Inst'l Index (VINIX)


• 11% Vanguard Extended Mkt Index (VEXAX)


• 35% Vanguard Total Int'l Index (VTIAX)


• 10% Vanguard Total Bond Mkt Index (VBTLX)

Within 2% of the allocation for a fraction of the price.  Should be no minimum investment for holding them in a 401(k).

...I'm not necessarily recommending you take that exact allocation - I mean, it's fine, def good enough - but that's how to mirror what you're currently in.

[NutADuc]

Thanks for the vote of confidence @TheWhiteCoatInvestor. Most financial concepts and terms I learned from reading a bunch of posts on your site and with time, they have become very clear to me what they mean. Rebalancing, however, is one term I believe I understand in theory. I just haven't looked into it close enough to say 'Oh, I know exactly what I am doing'.

Here is my explanation of rebalancing (in my own words, just from reading a bunch on WCI and some common sense):

Say you invest in two stock funds, A and B @ 50/50 according to your investment plan. A outperforms B and because of that, A tips the scale at 55/45. You would then sell 5% of A and take the funds and add them into B so that they are back to 50/50.

Is that it basically, @WCI?

 

[NutADuc]

I already made the trade. I did a 35/35 Inst'l Index and Extended Mkt Index, then 20% Int'l Index and 10% bond. I think that is reasonable. You guys definitely have way more experience than me so I'll take any advice.

[DMFA]

NutADuc wrote:

Here is my explanation of rebalancing (in my own words, just from reading a bunch on WCI and some common sense): Say you invest in two stock funds, A and B @ 50/50 according to your investment plan. A outperforms B and because of that, A tips the scale at 55/45. You would then sell 5% of A and take the funds and add them into B so that they are back to 50/50. Is that it basically, @WCI?

Click to expand...

Yep...except technically you're selling 9.1% of A because 5/55 = 0.91...but yeah, 5% of total assets from A to B.  You should be able to do that in one step.

NutADuc wrote:

I already made the trade. I did a 35/35 Inst’l Index and Extended Mkt Index, then 20% Int’l Index and 10% bond. I think that is reasonable. You guys definitely have way more experience than me so I’ll take any advice.

Click to expand...

You're going to be overweight in small cap and underweight in international as compared to the average target date portfolio (total stock is 80/20 500 to extended), but if that's what you want, that's fine.  No one can really call it wrong.  If small cap kills it in 2018 and int'l tanks, well...you'll be the investing oracle of 2018 and I salute you.

[NutADuc]

You are right @DMFA. It is 9.1%. That is what I meant. I will definitely look into that for my Vanguard Roth funds. It doesn't look like I am given the option of rebalancing on my in in the 401K. It only gives me an option to rebalance automatically according to my allocation then it asks me how often I want it done.

Also, I changed my allocations to mirror the Fidelity 2055 fund since the transaction didn't go through yet. Thanks for the explanations.