Hello All,
I am new to this forum and looking for some advice on investing my 401k assets, I had it mostly in Apple and the lost all my gains plus some and am tired of playing with individual stocks and becoming too emotional with them. I just want to put my cash in 5 - 10 funds or ETF's and just leave it there. I am 40 years old and somewhat risk tolerant but don't want anything supper risky. Any suggestions are welcome as I have a difficult time making up my mind as I continue to look at more and more options.
Thanks
Justin
Comments
1. If you are truly serious about wanting to "put my cash in 5 to 10 funds or ETF's and just leave it there", you should reconsider owning ANY ETFs or index funds. These funds will lose 35% to 55% of their value in the next bear market and it will typically take 4-5 years for these funds to regain their full value. The experience from March 2009 to present is unusual because many funds have already more than made up what they lost in the most recent bear market.
2. If you are looking for "buy and hold" funds you are best served by holding the following types of mutual funds:
a. Equity mutual funds with managers that have already proven they can lose significantly less money during a bear market than an S&P 500 ETF or index fund.
b. A balanced mutual fund which varies the percentage it holds between bonds and equities depending on market conditions.
c. An all-asset go anywhere/do anything fund with a totally flexible mandate.
d. Multi-sector (flexible) go anywhere/do anything bond funds.
My specific recommendations:
1. Defensive equity funds: AMANX, FMIMX, BPAVX, MAPIX, MVPFX, RYSEX.
2. Balanced funds: OAKBX, MAPOX, ICMBX, FOBAX, PRWCX.
3. All asset funds: FPACX, PAUIX.
4. Flexible bond funds: LSBRX, PDIIX, PIMIX, MWCRX, SUBYX.
bpa
Along with bee, I want to know what funds are available to you in your 401k. You won't even be able to respond intelligently until you can figure out whether the 401k is "wrapped" in an annuity--- like my brother's.... Are the available funds all "no-load?" You should NEVER have to pay for the "privilege" of buying shares in a fund--- particularly in a RETIREMENT vehicle.... And yet, until I stepped-in, my colleague was paying a 5.75% "load" that way every month. ......Or is your 401k entirely self-directed? That would indeed be unusual. While I was still working, my 403b was entirely self-directed. But that doesn't mean you can go anywhere and invest in anything. A great many fund-houses refuse to deal with 403b....I suppose it's not quite the same raw deal with regard to 401k plans. Let us know what is available to you. What are your fund options? It's helpful if you can give us the 5-letter ticker-symbol.
-Don't put all your eggs in one basket.
-Don't think that just because you put money in different baskets, then you are diversified.
-You'll have to formulate a plan. Once you're happy with your fund selections, don't switch in and out. Make changes seldom. I could suggest funds, but I'd be offering you a "pig in a poke" until you can give us some more information. It will be self-defeating to think you can select X number of funds and then just forget about it. On the other hand, choose well, and you'll have no need to worry about your money too much from day to day.
Generally speaking: you want some USA equities. Split it between large and small companies...... You'll want some bonds, but not too very much, particularly right now. Then, international.
Help us to help you get specific. All of us in here--- we live for this stuff! Others FEAR money. We love to discuss the ins and outs of it all.
A well stated summary. Hats off to you.
Catch
Thanks for the advice.
Justin
The Oracle, above, makes a lotta sense. Index funds will fall terribly, following the index they're tied to, when things turn sour. Stick with open-ended funds that know how to be defensive when conditions call for it.
I can (with Oracle) recommend MAPIX and I own it. Also, with the Oracle, MAPOX. And I own it, too. For EM Bonds (a smaller slice of your pie: FNMIX or PREMX (I own PREMX, too.).. LSBRX doesn't turn me on. DODIX deals in domestic bonds. (I have tracked it for years. Solid, reliable.)
I would go broader out beyond the USA with SFGIX, run by Andrew Foster, who did very well for shareholders at Matthews before opening up his own "Seafarer" fund.
You'll do well.
http://seekingalpha.com/article/1452811-a-new-market-beating-dividend-fund
Not quite set it and forget it but just rebalance once a quarter. I have no problems with the suggestions by others but feel you should NOT have more than 5 funds in this account.
What percentages would you put in each fund and for the ETF's what one would you use SPHD or SPLV? 75-25 seems good to me as far as asset allocation.
http://online.wsj.com/fund/page/fund_snapshot.html?mod=wsjportfolio&symbol=FPACX
http://online.wsj.com/fund/page/fund_snapshot.html?mod=wsjportfolio&symbol=BRUFX
Now,with the observation that any research of the best performing mutual funds covering five or more years, you will in most cases find the list peppered by the three words SMALL,VALUE,and EMERGING,I think you should consider a 5% allocation to each of these funds. HUSIX, VVPSX, THBVX, MAPIX, WAIOX,and WAFMX. This takes you to 45%. Add 5% allocations to TGLDX, BREFX, and TGINX to cover precious metals, real estate and foreign bonds and you're at 60%. For large cap exposure,a 10% stake in SPY. Over the next 3-5 years ,dollar cost average the remaining 30% into HUSIX, VVPSX, THBVX, MAPIX, WAIOX,and WAFMX on a monthly basis to find your comfort level as to your total risk exposure.Cash can be a mix of MM funds,CDs and RPHYX. At age 64,I own all funds mentioned except HUSIX, VVPSX and SPY.
At forty years of age,growth should still be your main goal for retirement funds, which in turn carries the risk along with the potential of larger rewards. Good luck!
With respect to your more serious subject, I'm afraid that our investment strategies, while rewarding, are so severely dated (we're in our 70's) that what worked for us would most likely be a complete disaster in this ridiculous market. One thing really in your favor- your age. Even if you do revert to a "buy and hold" approach, which you seem to be considering, you will have time to recover from the inevitable disasters which will occur between now and the time that you retire. As far as advice from the MFO group- you couldn't find a better bunch when it comes to helpfulness. Good luck, whatever way you decide to go.
Regards- OJ
IMHO, you would be best served by reading a book or two on asset allocation and then deciding on an allocation which suits your goals and which takes into account your appetite for risk. Good starting points would be Rick Ferri's "All About Asset Allocation" and William Bernstein's "The Investor's Manifesto."
Academic studies have found that about 90% of return is dictated by asset allocation. So if you want to keep it really simple, also take a look at a three or four fund portfolio. See http://www.bogleheads.org/wiki/Lazy_Portfolios
Justin
Investors in their forties should worry about fees; those in their sixties (probably, seventies for sure), about fund managers.
Oracle recommends good funds, but I'm not sure you need to be defensive at 40. If you think you would capitulate and sell out at a bottom, then defensive funds might be best for now, but you will have to become more aggressive in corrections, when index funds become an efficient purchase. This will happen several times before you are sixty. If you doubt your courage, buying after a 5% gain in the index will probably yield a profit.
Cash probably beats bonds for now, although River Park High Yield might be worthwhile.
Look at managers' ages, if you buy funds for the long term. That might make Seafarer appealing. More than half the gains will be overseas in the 20 years.
Currently, read GMO letters. If you can find an ETF in one of their recommended sectors, buy it and sell it when they change their opinion. (WOOD worked for me, but that was 2 years ago). I can't afford their minimums for their funds. While PIMCO may have interesting insights, I gave up and bought a couple of their funds.
If you really don't want to manage the money, pick a good fund family (TR Price, for example, for more "aggressive" investors; Vanguard for the conservative) with target date funds that weight equities at least 60% at retirement (or "cheat" upward on the retirement age if the equity allotment is lower) with low fees, and put the money there.
You may notice that I'm not paying much attention to fees, but I'm not 40. While it may be difficult for you to do, you may be better served by holding cash or River Park High Yield and waiting for a correction. This may be a fairly or overvalued market. Many people expect stocks to decline when the Fed reduces its bond purchases, which should occur in the next 2 years. I assume stocks will decline and that my fund managers will have anticipated this. You don't have to rely on their intelligence. Keep a lot of "powder" dry and pile in at that time.
If you want a presumably good fund manager to guide you, look at ARIVX. He's into cash now. When you see he has bought in, you will be somewhat late, but you're only 40, and he's into capital preservation, so you should be able to ride his coattails. He's fairly young also.