Go Back  DVD Talk Forum > General Discussions > Other Talk
Reload this Page >

Need help setting up 401(k)!

Other Talk "Otterville" plus Religion/Politics

Need help setting up 401(k)!

Old 02-15-05, 01:31 PM
  #1  
DVD Talk Special Edition
Thread Starter
 
Join Date: Dec 2000
Posts: 1,778
Likes: 0
Received 0 Likes on 0 Posts
Need help setting up 401(k)!

I'm a 31-year old technology analyst setting up 401(k) for the first time at my 10-month old job. I plan on having this job a while if it matters. My question is, should I use one of the predefined investment mixes, as pictured below, or should I customize my diversification? I don't know shite about investing, which is why I'm asking. If one of the following investment mixes are recommended, which should I go with? I was thinking of having 10% deducted from my check for 401(k) (they will match 100% up to 5%) and 10% for stock purchase. Any advice would be appreciated. Thanks.

Here are the investment mixes:

Old 02-15-05, 01:34 PM
  #2  
DVD Talk Legend
 
Join Date: Mar 2003
Location: Lyon Estates
Posts: 10,795
Likes: 0
Received 0 Likes on 0 Posts
High-Yield Bonds!!!
Old 02-15-05, 01:45 PM
  #3  
DVD Talk Legend
 
Join Date: Mar 2001
Location: Lompoc, CA
Posts: 11,466
Received 0 Likes on 0 Posts
I'd stick with an S&P 500 index fund. Since you're young, I'd ignore everyone's crap about diversification to spread risk, figuring that a 10-year risk on the market itself is just as low or lower--and you'll pay nearly *no* fees, which is where the big difference comes in.

I'm a cynical bastard, but to me, nearly all "investment mixes" are gimmicks with high fees.
Old 02-15-05, 02:05 PM
  #4  
DVD Talk Special Edition
Thread Starter
 
Join Date: Dec 2000
Posts: 1,778
Likes: 0
Received 0 Likes on 0 Posts
Please include as much detail as possible, as I have no idea what I'm doing here. Thanks!
Old 02-15-05, 02:14 PM
  #5  
DVD Talk Legend
 
Join Date: Mar 2001
Location: Lompoc, CA
Posts: 11,466
Received 0 Likes on 0 Posts
Perhaps other people will chime in with more traditional/conventional views, but for a great read about the general problem with mutual funds (and why a simple index fund is typically a better bet in the long run) check out this link.

You should read it all, maybe 10 pages. Very easy for newbies, and very different than what your 401k provider will tell you.

http://www.fool.com/money/401k/401k.htm
Old 02-15-05, 02:28 PM
  #6  
DVD Talk Hall of Fame
 
Join Date: Aug 2002
Location: Triangle, NC, USA
Posts: 8,810
Received 0 Likes on 0 Posts
I'm young, but I've diversified, some in stock mixes, some in bond mixes. Generally if stocks go up, bonds go down, and vice versa. I believe you should still diversify, but you have the time to be safe if you weight it more heavily toward the 'high risk/high return' long term mix.
Couple big easy concepts:
* contribute at least as much as your company matches.
* contribute as much as possible.
* try to avoid making withdrawals or loans if you can help it.
* think long term, esp for the interm. and long term mixes. Don't get freaked out if your rate of return drops short term, 401k [and the stock market] is meant to be a long term investment.
* Check into the fees and charges, and take that into account in your rate of return. A 5 percent return with a 3 percent fee is an effective 2 percent return.
Old 02-15-05, 02:29 PM
  #7  
DVD Talk Gold Edition
 
Join Date: Jun 2000
Location: Texas
Posts: 2,705
Likes: 0
Received 0 Likes on 0 Posts
Well the fed is about to lower interest rates so take your money out of t-bills and put it all in....waffles, tasty waffles with lots of maple syrup.
Old 02-15-05, 03:53 PM
  #8  
DVD Talk Legend
 
Join Date: Aug 1999
Location: Chicago, IL
Posts: 17,205
Likes: 0
Received 0 Likes on 0 Posts
Yikes. No index fund??
Old 02-15-05, 03:55 PM
  #9  
Banned
 
Join Date: Jan 2000
Location: Democratik People's Republik of Kalifornia
Posts: 22,995
Likes: 0
Received 0 Likes on 0 Posts
31 eh? Go aggressive
Old 02-15-05, 04:08 PM
  #10  
DVD Talk Legend
 
Join Date: Mar 2001
Location: Lompoc, CA
Posts: 11,466
Received 0 Likes on 0 Posts
Originally Posted by ChiTownAbs, Inc
Yikes. No index fund??
It could be that those 5 mixes are his only options, but more likely that's just the catagory they're pushing hardest.

If you're really stuck with those mix choices and no ability define something on your own or choose an index, then yeah, I'd just go aggressive with the long-term mix.
Old 02-15-05, 04:25 PM
  #11  
DVD Talk Hero
 
Join Date: Jul 2001
Location: MI
Posts: 25,061
Likes: 0
Received 0 Likes on 0 Posts
Are those the only choices? If so, either of the two on the right. At 31 you have a very long term investment horizon, and stocks have higher returns but more risk. As you get closer to retirement (say 5-10 years before) and the market is "up" I'd sell them off and start drifting toward the left most options.
Old 02-15-05, 05:10 PM
  #12  
Moderator
 
nemein's Avatar
 
Join Date: Sep 1999
Location: 1bit away from total disaster
Posts: 34,150
Received 0 Likes on 0 Posts
I stongly recommend the gold, food and ammo investment plan myself

Seriously as others have said since you are young you can afford to be more aggressive in your planning right now. If you want to "diversify" some you can mix it up a bit w/ growth funds and maybe some international funds. The main thing I would question though is the 20% total taken out of the paycheck for retirement planning. Personally I would definately do the 5% for the matching, some into the company stock, but then take the extra and do a ROTH IRA and/or some sort of investment/brokerage account (like an Etrade/Ameritrade). This will be an account that you can use as a "midterm savings" account[1]. That is money you want to put at a little more risk for a greater return (hopefully ) but it's not locked into some IRA which makes it difficult/impossible to get to if you need it. 20% locked away for retirement just seems a bit much to me.


[1] You really want to have 3 "levels" of savings... short term is the cash you can get your hands on right now, these are things like savings and checking accounts. The midterm are things that make it a little more difficult to get at the money immediately but should give you a better rate of return. On the conservative side there are things like CD and a host of other "certificates", on the riskier side are things like the brokerage account I was talking about above. The last is the "long term" (or retirement) savings. You certainly want to max out what you can but if you get too much locked away in these things you're missing out on possibilities/uses now (buying a house for instance).
Old 02-15-05, 05:11 PM
  #13  
DVD Talk Hero
 
Join Date: Jun 2000
Location: Somewhere between Heaven and Hell
Posts: 30,659
Received 5 Likes on 3 Posts
I hope it's not something you want photoshopped.











Old 02-15-05, 07:37 PM
  #14  
DVD Talk Special Edition
Thread Starter
 
Join Date: Dec 2000
Posts: 1,778
Likes: 0
Received 0 Likes on 0 Posts
Is an equity index fund the same as a stock index fund?
Old 02-15-05, 07:55 PM
  #15  
DVD Talk Gold Edition
 
Join Date: Jun 2004
Location: Houston, Tx.
Posts: 2,713
Likes: 0
Received 0 Likes on 0 Posts
Here is alot of reading that you can do. Don't forget to get some used books to read to help you out!
http://www.fatwallet.com/forums/mess...hreadid=207875

The general consenus is that I have read is that you want to max out you 401K to meet your companies match (5%),

Then get a Roth IRA, max it out.
Then maybe a solo Mutual Fund
Then use the rest for the 401K

Don't forget to have a "rainy day" savings of about 6-12 months
Old 02-15-05, 08:06 PM
  #16  
DVD Talk Gold Edition
 
Join Date: Jun 2004
Location: Houston, Tx.
Posts: 2,713
Likes: 0
Received 0 Likes on 0 Posts
Without knowing what the funds names actually are, it may make a difference on which ones I would choose. Expense ratios could be a big factor in your total return of the fund, especialli in 20-40 years time!

A mutual fund's total annual operating expenses (including management fees, distribution fees, and other expenses) revealed as a percentage of the fund's average net assets.

High expense ratios decrease investors' returns. An example would be two funds that both earned an 10% return before fees. If the first fund has an expense ratio that is 2 percent higher than second fund, you lose an extra 20 percent of your expected returns each year when your money is in the first fund. High expense ratios doesn't mean better results.

The expense ratio does not include brokerage costs and various other transaction costs that may also contribute to a fund's total expenses.

http://flagship5.vanguard.com/VGApp/...stsContent.jsp
Old 02-16-05, 12:41 AM
  #17  
DVD Talk Hall of Fame
 
cruzness's Avatar
 
Join Date: Sep 2000
Location: Home of the UF Gators and Nat'l Championships, Gainesville, FL
Posts: 7,864
Received 0 Likes on 0 Posts
Since you are fairly new at this and you are fairly young and you are just getting started I would recommend the 2 on the left. Stick with the high risk stuff if those are your options. The lowest risk fund you should have would be something thast follows the S&P500 or a fund made up of Blue Chip Companies. I did something similar to that when I first started and i did fine over the long haul. The other members are right. The minimum you should put into your 401K is the company match so that you can make sure your employer puts in the maximum amount that they have to. Do not even worry about diversifying your 401K too much until you have more than a vested amount of 20K. I currently have over 30K in my Rollover IRA (when I left my old job I put my 401K into this account)and I only recently decided to diversify my accounts. Less than 5% is in bonds. 10% is in International stocks. 10% is in personally chosen stocks ( Texas Instruments, Microsoft and others) another 20% is in Blue chippers and S&P and the rest is in high risk stock funds. My next plan will be to setup a new 401K with the company I am working for while I go to school. I have heard alot of good things about Roth IRA's and I will probably set one up for myself once I graduate from school.
Old 02-16-05, 01:04 AM
  #18  
DVD Talk Limited Edition
 
Baron Of Hell's Avatar
 
Join Date: Oct 2004
Location: Seattle and sometimes hell
Posts: 5,995
Likes: 0
Received 0 Likes on 0 Posts
There was book I read that was pretty good call the automatic millionaire. It was suggested to me when I asked about a good book on the subject.
Old 02-16-05, 09:57 AM
  #19  
DVD Talk Hall of Fame
 
Duran's Avatar
 
Join Date: Jul 1999
Location: Columbia, MD
Posts: 8,177
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by Patrick G
Is an equity index fund the same as a stock index fund?
Yes.

My advice: You are young, and therefore can absorb more risk. Ignore their recommended mixes - they are geared to invest you in different funds that usually have higher expenses in order to generate revenue for them.

IMO, you best bet is to do what I do and put it all in an index fund (stock index fund, equity index fund, they're the same thing). This means the fund will essentially try to match the stock market as a whole, usually by tracking the S&P 500. This usually means it has low expenses, since it doesn't require "active" management.

How much you put in is up to you, but you'd be foolish to put any less than what your company will match, as that is just free money.
Old 02-16-05, 06:30 PM
  #20  
DVD Talk Special Edition
Thread Starter
 
Join Date: Dec 2000
Posts: 1,778
Likes: 0
Received 0 Likes on 0 Posts
So, do I want an Equity Growth Fund or a Stock Index Fund?
Old 02-16-05, 07:11 PM
  #21  
DVD Talk Hall of Fame
 
Duran's Avatar
 
Join Date: Jul 1999
Location: Columbia, MD
Posts: 8,177
Likes: 0
Received 0 Likes on 0 Posts
IMO, an Index Fund. Least expenses and will provide you a return (based on historical data) of 9 to 12% a year over the long haul.
Old 02-16-05, 08:37 PM
  #22  
DVD Talk Legend
 
Join Date: Jan 2000
Location: Region 1
Posts: 16,291
Likes: 0
Received 0 Likes on 0 Posts
Look for a fund with the most commodity investment.

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Thread Tools
Search this Thread

Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.