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My 401K bond options

edited April 2011 in Fund Discussions
My 401K bond options are limited. I have Pimco Total Return A PTTAX and six T. Rowe Price Retirement Funds, Income-RRTIX, 2010-RRTAX, 2020-RRTBX, 2030-RRTCX, 2040-RRTDX, 2050-RRTFX.

I plan to increase the bond percentage of my 401K from less than 5% to about 15%. I currently only have bond exposure through RRTCX.

Which would you consider the better choice to increase the the percentage of bonds, Pimco, the 2010 or 2020.

Thanks in advance.



  • Of the funds you have listed only thee PIMCO Total Return fund is bond fund. Other funds you listed (Target Retirement funds) have some bonds but they are not pure bond funds.

    If you need more bonds, get PTTAX (assuming it is load waived in 401k). Alternatively, if you have been investing all your retirement monies in a target fund, you can step down the date to pick up more bonds.

    BTW, If you are investing in a mix of funds yourself, then there is no point in also getting target fund.
  • RRTIX and RRTAX will have majority in different bond classes - i am even willing to bet they are managed identically. However, as Investor pointed out, they are not pure bred bond funds if that's what you need for asset allocation.
  • I am trying to save as much as I can in my 401k and really don't know what choices are the best. I have mostly equity funds with 30% T.Rowe Price 2030- RRTCX, 20% MSF Value- MVRRX, 20% Alger Cap Appr-ALARX, 15% Allianz NFJ Sm Cap-PCVAX, and 15% Janus Overseas-JIGRX.

    The only exposure to bonds is in the 2030, so I am going100% to the PTTAX for a few months to build it up to 15%.

    My company 401K is through ADP and ADP pretty much sucks in terms of service but I don't really know if the funds are quality or not. The complete list is:

    I welcome all comments and observations.

    Invesco Stable Asset Fund
    RRTIX- T. Rowe Price Retirement Income R, + 2010-2050
    PTTAX- PIMCO Total Return A
    MVRRX-MFS Value R2
    SVSPX- SSgA S&P 500 Index Instl
    SRVEX- Victory Diversified Stock A
    ALARX- Alger Capital Appreciation Instl I
    FMIVX- Virtus Mid-Cap Value A
    ATHAX- American Century Heritage A
    PCVAX- Allianz NFJ Small Cap Value A
    FSCTX- Fidelity Advisor Small Cap T
    SSCRX- SSgA Small Cap R
    PAIGX- T. Rowe Price Intl Gr & Inc Adv
    JIGRX- Janus Overseas S

  • My favorites out of your options are:

    PTTAX- PIMCO Total Return A
    PCVAX- Allianz NFJ Small Cap Value A
    JIGRX- Janus Overseas S
  • Hi DPN. I would suggest you do a few Instant X-ray's in M* to see where you are at now and then change a couple different senarios. A quick look shows you are at 92% stocks (71% US, 21% intrnl'). Only 4% bonds. Another thing that stands out is of that 92% stock allocation, 70% of that is large cap. I'm not suggesting any of this is bad, just ask yourself, is this where you want to be going forward.

    I think you have some pretty decent fund choices to choose from. I would try taking 5-10% from one of the large cap equity funds and putting it into the Pimco Total Return fund to get the bond exposure you are looking for (that would be my preference over moving to a higher bond allocation target fund). I would try adding the PAIGX, the TRP International fund also to see how that bumps up your International exposure. Same for adding more small cap.

    Do some playing in Instant Xray to get an idea where you want to be. God luck with your choices.
  • It never ceases to amaze me what awful investment options are included in most 401k plans. I mean, where do the trustees/investment committees come up with such truly bizarre lists? I understand when a plan is sponsored by an insurance company, and many plans are variable annuities, which is awful in itself. But then they compound the error by the poor investment options available. Do you suppose the insurance company gets some kind of financial remuneration from the fund companies it uses? Nah, that would NEVER happen (LOL!).

    But what about those plans that are NOT through an insurance company? Where do the trustees find some of these truly horrible funds, and how do they justify them from a fiduciary standard? The truth is that they cannot justify them, and at some point one or more plan participant could file suit, and these folks would have no defense. And very few plans have any kind of Investment Policy Statement, either, which would at least provide some kind of investment guide and recognition of fiduciary responsibility.

    The list of options in the plan above at least has 2-3 that are acceptable, but some are just crazy.
  • edited April 2011
    RRTIX, Retirement Income R Series, is identical to TRRIX except that the "R" series snatches an extra half percent off the top in expense ratio, presumably to compensate your plans intermediary. TRRIX carries a .59% ER currently while RRTIX is at 1.09%. Bottom line: your annual return will be reduced in proportion to this added expense. This fund is the only retirement fund in Price's lineup that maintains a fairly static allocation to stocks and bonds, about 40% stocks and 60% bonds. Unlike the other retirement funds, its mix does not tilt more toward bonds over time. One option, then, would be to include this fund in your lineup and do the math to arrive at the % in bonds you want to have.

    PTTAX carries a 3.75% front end load and a .90% ER. While the ER is a bit lower than RRTIX, keep in mind that with the Price fund you are also paying for the management of the stock portion.

    A third option is to keep your cash and bond money in non-retirement accounts and include them with the retirement monies for allocation purposes. With the very low rates of interest available, your not gaining a whole bunch in the way of tax savings using a tax sheltered account for stable assets. Course that will change some day. Bonds vary alot, but in a stable short term bond fund or CD at current rates, it would take a number of years to earn the equivalent of the 3.75 Pimco load you'd pay up front. Not sure what the Pimco fund returned in recent years, but with rates as low as they are now, a repeat of recent performance seems unlikely. However, there is a tax break at the time you contribute to a 401K and so it may not be desirable from that standpoint to invest outside the plan. If you could do so through a separate Roth IRA (translate: lower fees and more control) it might make more sense to you. Hope this helps.
  • I like that M*x-ray but it is too bad you have to pay for the extra functions.

    I am still learning about investing and found MikeM's comments about allocation very interesting. I decided not to go with the PTTAX for now and instead build up the small caps with PCVAX.

    When considering allocation in relation to the % box on M*x-Ray LG/MED/SM Caps/Value/Blend/Growth, is there a middle of the road point from which to start? Then tune to your personal preferences and risk tolerance?

    I understand it is different for the individual but I am trying to get a scenes of where to start and where to go given the choices in my 401K.

    Thx all

  • edited November 2011
  • My 401k also contained a fairly motley collection of funds - some OK, some horrid. Mix of active and index funds.

    I recall "working out" on a spreadsheet that the value of tax deferred investments - if tax rates don't change - is somewhere on the order of 80 - 100 bps.

    Not sure if above is correct, but let's assume that it is.

    So what I did is list my funds (the exact share classes I had access to) with their expense ratios.

    I then compared those ratios - fund by fund - with the average fund expense ratio and index fund/etf fund ratios. If a fund (in an asset class that I was interested in) had an expense ratio of more than 80 bps higher than the "average" or "typical", then I eliminated it from consideration.

    I ended up using 4 funds, with an average ER of 48 bps, in my 401k. I could "live" with that.
  • To be honest DPN, I don't believe in the M* box strategy all that much. I think it is very useful to make sure you are diversified between equities and fixed income/cash and have a comfortable split between US and International stocks, but I don't think it's very important to fill each box with a fund. Heck, I have 45% of my 401k in 4 allocation type funds that I think have very good proven managers that do the allocation work for me: FPA Crecsent FPACX, Ivy Asset Strategy WASYX, Permanent Portfolio PRPFX and new to this allocation group, Fairholme Allocation FAAFX. For all of these funds, I bought the manager and his investment strategy.

    I'm sure other opinions may differ from mine, but again, I would pick the equity/fixed income percentages that you are comfortable with based on your age and risk tolerance. And the core of this portfolio could certainly be one of the TRP target date funds available to you. That would give you a good basis for diversification. If the 2030 fund is the allocation equity/fixed allocation you want (84% equities I see), put maybe 50% in that one fund and hold it as your diversified core. Then add to that a mix of a few of the better funds in your 401k. I'm not familiar with most of the funds you listed, but OOBY pointed out 3 pretty good ones in his post. And there is certainly nothing wrong with using the large and small cap index funds to get the mix you want. And then take another look at x-ray.

    Just some ideas... good luck to you.
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