American Funds - Retirement Advice
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American Funds - Retirement Advice
Posted by Joshjrn on 12/9 at 4:50 pm
I'm being offered a menu of American Funds from my employer for my retirement matching. I have a decent amount of experience (for a layman) in stocks and mutual funds for short to medium term investing, but I feel like I'm wading into uncharted water with this. I'm in my mid 20's, short term bear, mid to long term bull with an above average, though by no means extreme or excessive, appetite for risk.

Basically, I'm interested in any help, whether that be in the form of information from those familiar with the fund family, or just tips on what I should be looking for with funds of this type for this purpose.

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Posted by AthensTiger on 12/9 at 5:36 pm to Joshjrn
We did good with the New Perspective fund over about 10 years until the crash. Don't have American Funds any longer though.

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Posted by TigerRob20 on 12/9 at 5:56 pm to AthensTiger
Switched a year ago and have lost $150 this year. Sucks

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Posted by Janky on 12/9 at 8:00 pm to TigerRob20
American Funds aren't horrible for loaded funds. Just grab a decent allocation and you will make money over time. Fundamental investors, American mutual fund, ica, euro pacific growth and a few bond funds are pretty good. Good luck.

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Posted by Joshjrn on 12/9 at 8:14 pm to Janky
I appreciate it. All of the funds you listed, excluding ICA, had made my initial short list, so apparently I'm doing something right

I am a bit concerned about the bond funds, though, in spite of their healthy YTD returns. I'm nervous that interest rates are going nowhere but up in the medium to long term. However, I'm admittedly a bond neophyte.

When you say allocation, did you mean that as a euphemism for the funds, or are you suggesting I diversify between the funds? I know I have the option of splitting between up to three funds.

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Posted by Janky on 12/9 at 8:35 pm to Joshjrn
3 funds? Are you telling me you can only have 3 funds? If so, do they offer retirement date funds? If so, this may be your best bet.

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Posted by Joshjrn on 12/9 at 8:46 pm to Janky
The form allows for 8. However, the non-financial professional giving me all of my forms specifically said 3. I will check on that tomorrow. Target date funds are also available.

That said, how many funds do you think would be ideal? It didn't even occur to me that I would need to highly diversify highly diversified funds

This post was edited on 12/9 at 8:52 pm

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Posted by Janky on 12/9 at 8:59 pm to Joshjrn
Target date is probably the way to go. The basic funds are not that diversified. Therefore, you would need several to cover your bases. To start out 3 might work, but as your account gets bigger greater diversification would be better.

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Posted by Joshjrn on 12/9 at 9:04 pm to Janky
Now that I'm looking closely at them, that makes sense as the target date funds are essentially funds of funds.

For funds like these, what should be my target age? I'm assuming 60 as 59.5 is the withdrawal age, but I'm just guessing.

Also, I assume there is no penalty for changing my portfolio, and I can do so at any time?

This post was edited on 12/9 at 9:06 pm

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Posted by Janky on 12/10 at 6:57 am to Joshjrn
I would go a little further out than 60. If as you get closer you have enough money you can make changes. You should be able to switch fund options pretty easily online.

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Posted by Janky on 12/10 at 7:13 am to Janky
BTW, I doubt you will pay loads on these funds. I think American funds uses R shares for 401(k) plans.

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