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Message
Opened an Individual and Roth 401k - Vanguard Target Date, LifeStrategy or ETFs?
Posted on 12/20/15 at 5:23 pm
Posted on 12/20/15 at 5:23 pm
I opened the account through TDA since they had some extra options on their 401k's vs Vanguard such as the brokerage option and if I need to at some point, loans. I am 40 and I will max out the contribution this year.
I am looking at 3 options for my Individual 401k:
1. Vanguard Target Retirement 2035 Fund VTTHX ER .18%
or maybe even consider doing a 2040 fund so it's a little more aggressive. Any thoughts on that strategy?
2. Vanguard LifeStrategy Growth Fund VASGX ER .17%
Those 2 are similarly allocated currently but the Target Date will change that as I age. I don't know much about these LifeStrategy funds or how that works going forward and if I need to change to a Moderate Growth, then Conservative Growth, etc as I age? For those who have these LifeStrategy Funds, what's your thoughts on them?
3. Buying ETF's that mostly make up those funds and having an average ER of .09%.
I was thinking something like:
Total Stock (VTI): 45% - ER .05%
International (VEA): 30% - ER .09%
Bond (BND): 20% - ER .07%
And then maybe something like
REIT (VNQ): 5% - ER .12%
or should I go Int. Bond as in the above Funds? Any other suggestions would be appreciated.
These are all commission free ETF's.
Is it worth paying double the ER for having the funds more actively managed compared to a newb like myself following the market and having to change the allocations over the years (I'm kinda thinking yes
)? Is there anything else I need to consider other than the fees difference and the management difference?
TIA for any advice
I am looking at 3 options for my Individual 401k:
1. Vanguard Target Retirement 2035 Fund VTTHX ER .18%
or maybe even consider doing a 2040 fund so it's a little more aggressive. Any thoughts on that strategy?
2. Vanguard LifeStrategy Growth Fund VASGX ER .17%
Those 2 are similarly allocated currently but the Target Date will change that as I age. I don't know much about these LifeStrategy funds or how that works going forward and if I need to change to a Moderate Growth, then Conservative Growth, etc as I age? For those who have these LifeStrategy Funds, what's your thoughts on them?
3. Buying ETF's that mostly make up those funds and having an average ER of .09%.
I was thinking something like:
Total Stock (VTI): 45% - ER .05%
International (VEA): 30% - ER .09%
Bond (BND): 20% - ER .07%
And then maybe something like
REIT (VNQ): 5% - ER .12%
or should I go Int. Bond as in the above Funds? Any other suggestions would be appreciated.
These are all commission free ETF's.
Is it worth paying double the ER for having the funds more actively managed compared to a newb like myself following the market and having to change the allocations over the years (I'm kinda thinking yes
)? Is there anything else I need to consider other than the fees difference and the management difference? TIA for any advice
1
Posted on 12/20/15 at 6:25 pm to Sho Nuff
If you are funding 100% at once, make sure you dollar cost average, whether you purchase the mutual funds or ETFs.
I personally don't like ETFs for long term investing, they just seem a little more unstable to me. If you like the vanguard mutual funds you probably should have just went with the vanguard account IMO. I would think they are not commission free with TDA, but not 100% sure on that. Probably worth looking into.
I personally don't like ETFs for long term investing, they just seem a little more unstable to me. If you like the vanguard mutual funds you probably should have just went with the vanguard account IMO. I would think they are not commission free with TDA, but not 100% sure on that. Probably worth looking into.
Posted on 12/20/15 at 6:41 pm to TigerDeBaiter
quote:
If you are funding 100% at once, make sure you dollar cost average
Isn't DCA when you buy every month a fixed amount? I have to do my employee contribution by the end of the year so I am maxing that out ($18k). I don't have the time to do that for 2015. I can likely do that going forward though. I just need to figure how much I want to contribute for sure. I may not max every year, depends on my income as I'm 1099 it's not the same.
quote:
If you like the vanguard mutual funds you probably should have just went with the vanguard account IMO. I would think they are not commission free with TDA, but not 100% sure on that. Probably worth looking into.
As mentioned, TDA offered extra options above Vanguard. I do have to pay $49.99 for the mutual fund but if I do systematic investments on the same fund then I don't pay it each time. Basically, by doing DCA or by setting up deposits at the same time each year I only have to pay the fee the first time, so no real difference as Vanguard charges a $20 annual fee and TDA does not.
quote:
I personally don't like ETFs for long term investing, they just seem a little more unstable to me.
Yeah, I feel that may be the case more so from my end than the ETF itself. I have to be the one doing the "managing" so it's probably worth paying the more expensive ER. And because it's Vanguard it's only .18% anyway.
Posted on 12/20/15 at 7:45 pm to Sho Nuff
quote:
Isn't DCA when you buy every month a fixed amount? I have to do my employee contribution by the end of the year so I am maxing that out ($18k). I don't have the time to do that for 2015. I can likely do that going forward though. I just need to figure how much I want to contribute for sure. I may not max every year, depends on my income as I'm 1099 it's not the same.
It doesn't have to be "monthly." It could be any fixed period of time really.
I imagine you can put the whole 18k into a Money Market in the 401k, then "DCA" from that MM to whatever selection you'd like.
Lastly, I ended up going from a mix of VEA, VSS, and VWO to the all encompassing VXUS. Got over slicing and dicing for "fun." Just something to look at for yourself.
This post was edited on 12/20/15 at 7:47 pm
Posted on 12/20/15 at 8:12 pm to Teddy Ruxpin
quote:
It doesn't have to be "monthly." It could be any fixed period of time really. I imagine you can put the whole 18k into a Money Market in the 401k, then "DCA" from that MM to whatever selection you'd like.
Exactly. Contributing and choosing investment elections are two separate decisions. You can still DCA your investments even if you contribute all at once. Just leave the majority in your MM (think cash) balance.
Posted on 12/20/15 at 10:02 pm to Teddy Ruxpin
quote:
I imagine you can put the whole 18k into a Money Market in the 401k, then "DCA" from that MM to whatever selection you'd like.
I see, that's good to know and that's what I'll do then. Gonna put the employer max sometime in Feb once I talk to my CPA.
quote:
Lastly, I ended up going from a mix of VEA, VSS, and VWO to the all encompassing VXUS. Got over slicing and dicing for "fun." Just something to look at for yourself.
I looked at that one as its in the Target Date fund but I was looking at commission free ETFs and it's not on the list.
Posted on 12/20/15 at 10:03 pm to TigerDeBaiter
quote:
Contributing and choosing investment elections are two separate decisions. You can still DCA your investments even if you contribute all at once. Just leave the majority in your MM (think cash) balance.
Posted on 12/21/15 at 9:27 am to Sho Nuff
I'm pretty sure Vanguard only has an annual fee if you refuse to go paperless. I've certainly never paid one.
Posted on 12/21/15 at 4:29 pm to Joshjrn
quote:
I'm pretty sure Vanguard only has an annual fee if you refuse to go paperless. I've certainly never paid one.
You're talking about a solo 401k? I have a Roth IRA and no fee because like you said, but the 401k is different. It did say it's waived if you're Vanguard something or other, which I assume is a tier or something like that.
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