401k help - I don\'t know anything
 

So,

I know 401k has a FAQ, but I don't see my funds in there, and I don't know if my funds are 'large cap' or 'index funds' if they don't say it.

Mods can delete this if it's already too exhausted. I do plan on 'learning how to fish' as I've seen it put, but in the time in between I'd like to have the chance to have my money doing the most it can while I learn.

I don't really know much about investing, except that I should be contributing to my 401k. So, I do, but I don't really know how to allocate it, and just spread my money out and put more in 'aggressive' and 'moderate' areas than 'low risk' funds, etc.

I want a fairly aggressive approach as I'm 25 and don't really plan on retiring any time soon.

Here are the areas I can put my money:

I tried to make this as readable as possible - if it's horrible, a headache, or anything else, let me know. I'll try to make it better, or take out unecessary info/add more. I do have access to a write up on each fund if anyone is interested, but at this point, it doesn't do much good to me.

Thanks for the help.

I'll also answer as many relative questions as possible.

-----------------------------------------------------------

FUND NAME / YTD / Month / 3 Mon / 1 yr / 3 yr / 5 yr

Stable Value Fund .................. 0.41% / 3.43% / 1.22% / 4.42% / 3.04% / 2.49%

Broad Market Bond Index Fund ..... 1.50% / 3.06% / 3.79% / 3.65% / 3.33% / 4.83%

S&P 500 Indexed Equity Fund ....... 2.37% / 8.49% / 5.65% / 10.72% / 12.22% / 6.90%

Investment Co of America .......... 1.75% / 10.20% / 4.11% / 12.91% / 13.51% / 8.59%

Vanguard Windsor Fund ............. 2.09% / 8.25% / 4.19% / 11.61% / 13.83% / 9.47%

American Century Growth Fund ..... 1.92% / 3.81% / 5.06% / 7.34% / 9.92% / 4.83%

Small/Mid Cap Index Eq Fund...... 2.16% / 5.69% / 0.00% / 8.24% / 15.67% / 13.10%

New Perspective Fund .............. 3.43% / 11.06% / 4.50% / 16.11% / 17.94% / 12.60%

MSCI EAFE Indexed Equity ........... 2.73% / 14.48% / 3.92% / 19.07% / N/A / N/A

Conservative Asset Alloc Fund ...... 1.77% / 4.87% / 3.99% / 6.08% / 6.67% / 6.37%

Moderate Asset Allocation Fund ...... 2.04% / 6.69% / 4.18% / 8.52% / 10.05% / 7.78%

Aggressive Asset Allocation Fd ...... 2.23% / 7.96% / 4.18% / 10.27% / 12.53% / 8.80%

Company Common Stock Fund ........... 4.00% / 36.25% / 20.13% 42.57% / 24.64% / 14.95%

ESOP Fund ................................. 4.01% / 36.22% / 20.19% / 42.59% / 24.73% / 15.37%

Re: 401k help - I don\'t know anything
 

Step one, decide on an asset allocation. ex. 15%bonds,70%domestic equity, 15% foriegn equity.

Step two, figure out which of those funds are index funds (passively managed) and then figure out which of those fit into your asset allocation. example: MSCI EAFE Indexed Equity would be a good choice for the 15% forigen equity.

Step 3, go buy a good book on passive index fund investing such as "The Four Pillars" or "The Booglehead Guide to Investing".

-This way you'll know whats going on and this knowledge will help you stay the course in downmarkets and feel more incontrol and less stressed about investing.

-Matt

Re: 401k help - I don\'t know anything
 

Thanks for the input. Using these 'steps' would you think that I'd only have my money in three funds then?

1 domestic equity
1 foreign equity
1 bonds

Re: 401k help - I don\'t know anything
 

yes, keep it simple for now. When you have a huge 401k balance (a couple hundred thousand) I might worry about slicing and dicing more, but I still dont think I would even use more than 3 funds. You're not an expert, keep is simple, and this is likely to beat whichever 10 fund porfolio you would have come up with.

Re: 401k help - I don\'t know anything
 

Nice - thanks. That was one of the biggest things I was confused about.

Also, do you think I should keep any in my company stock? Or whatever that ESOP fund is? (They put the match into the ESOP, but I can move it)

Re: 401k help - I don\'t know anything
 

no problem.

I wouldnt personaly never own my company's stock (I would not own any single stock holding for that matter). Forget all the risks associated with owning a single stock for a second and think about what happens if you company has a terrible few years where they lay you off and their share price plumets.

not worth the risk of losing your job & taking a hit on your 401k + other negatives associated with single stock holdings.

Re: 401k help - I don\'t know anything
 

Okay, I did some reading about some of the funds I can invest in. I tried to figure out what they were, and how much I would put into each one.

Then I ran across this:
Aggressive Asset Allocation Fund

(Here is the text copied from the PDF document)

Overall Morningstar Rating:
*****

Morningstar Return:
Above Average

Morninstar Risk:
Low


(Then the text)
The fund invests in four underlying index funds that are designed to track market indices in the following proportions: 50% in the S&P 500 Index, 15% in the Russell Small Cap Completeness Index, 15% in the Morgan Stanley EAFE Index and 20% in the Lehman Brothers Aggregate Bond Index. Monthly rebalancing is used to maintain the fixed proportions. To increase index tracking accuracy and provide liquidity, up to 5% of the Fund may be held in index futures contracts. The Fund also generates some income by loaning securities to creditworthy financial institutions. The Fund seeks to produce long-term growth of capital and income. This Fund may be appropriate for an investor who prefers an aggressive risk exposure or for an investor who is many years away from retirement, if used as a primary investment option. The Fund may also be appropriate to add diversification if used in conjunction with several other investment options.


-------------------

It seems like that's what I'm trying to do, and they do it for me. Should I just dump all of my money in here?

Re: 401k help - I don\'t know anything
 

If you are 25 why would you have any of your 401k in a bond fund? My advice is to hold off on the bond allocation until you are 10-15 years from retirement. I say this because you want to maximize your long term returns, and if you are continuing to save, you won't mind volatility much since you will benefit from "dollar cost averaging", i.e. bear markets enable you to buy proportionately more stocks.

That's assuming you've got 20 years + to let this grow. If you want to tap your 401k for other reasons in the next decade, then you should have some bond fund coverage to minimize the chance that you'll need money during a bear market.

The particular fund you mention is S&p 500 heavy, it's reasonable to assume that smaller company stocks will continue to outperform over long periods (since it's a less efficient market academic theory is that it has to offer higher returns) so you don't want to be too tied so strongly the largest 500 stocks.

And choosing this fund (who's fund is this?) seems like it would add a layer of fees, hurting performance. You can own index funds directly, and should beat this fund by the difference in fees. My advice is always something like

65% total us market index fund.
35% international index fund.

Or differing ratios that you feel more comfortable with.

If you were within 10-15 years of retirement, I'd add 10-20% bond funds, and increase their percentages gradually until they were in the 30-50% range by retirement.

If this is too much work, there are "lifecycle" funds that Vanguard and others sell that do it automatically for you. Pick one with a target date that matches your retirement goals and never think about this again again. There is another layer of fees, but Vanguard is usually very cheap, and you'll get the bond fund allocations managed properly for you (though more conservatively than my recommendations).

Re: 401k help - I don\'t know anything
 

Thanks for the input. I don't know who's fund it is - my company gave me a choice of funds to put my money in. I don't really know if I can just pick my own funds. I think I'm restricted to what they offer me to choose from.

This is where the Aggressive Asset Allocation Fund comes from. So, to go with that - I don't know if there would be any fees associated. (In all of my reading on the 401k site, (linked from my company's employee portal), I haven't seen any mention of fees for anything.

As far as bonds go, I was just following advice of other posters here - most seem to advocate having 20% in bonds regardless - that's where I came up with the idea of having some in bonds.

Re: 401k help - I don\'t know anything
 

OK, I admit I didn't read your original post very well. All mutual funds have fees, they are annual management expenses. Skim through the PDF until you find them. Typically Vanguard's index funds are about .2% per year. An actively managed fund can easily be 1.5%-2%+ annually. That difference of 1.5% or more a year is why most actively managed funds can't beat the indexes over long periods.

If your aggressive asset allocation fund's expense ratio is similar ton the expense ratios of the component funds, then it's personal preference. Otherwise I'd look at doing 1/3 S&P 500, 1/3 small/midcap index, 1/3 MSCI fund (which I believe is an intl index).

The reason I recommend intl exposure is to protect you from the declining U.S. dollar and expose you to potential faster growing markets. The dollar theory is as long as we run big deficits the dollar will continue to decline, your intl fund will actual go up if the dollar goes down.