![]() ![]() For a moderate investor, a worthwhile mix would be 60 percent stocks, diversified across U.S. Write down an investment policy statement that includes your objectives and percentage allocation to each asset class. It is helpful to know the reason for owning each fund and how it fits into your overall plan. Have you considered emerging-markets stocks for global growth? Do you have inflation-protected bonds if most of your portfolio is income-oriented? Have you considered commodities and REITs, which may not move in lockstep with stocks? ![]() Keep in mind that you’ll need some basic education before you even make a decision on how to allocate. Play around with them a bit, inserting your age, risk tolerance (aggressive, moderate, or conservative) and goals (income, growth). You can find this if you have spent any time on a major mutual fund website, where you can find allocation tools that will help you decide which funds to choose and the right percentage of each. What is essential for any high-quality 401(k) is something that’s often missing from the mix: Personalized advice. The portfolio’s three-year strategic return has been just under 10 percent. There are even emerging markets bonds through the PowerShares Emerging Markets Sovereign Debt fund (PCY). The plan offers funds covering commodities, TIPS, stocks, bonds and REITs. (Note: As with all of the plans I cite, I haven’t mentioned all of the funds within them and many may have changed their offerings.)įor an even more streamlined - and lower-cost - approach, I like the simplicity of the Sharebuilder 401(k), which uses all exchange-traded funds (ETFs). A strategic, rebalanced portfolio reaped an 8.7 percent return this year through August 31. You can broadly diversify with the Total International Stock Index (VGTSX) or invest in a conservative income fund like the Vanguard Wellesley Income fund (VWINX). The Google 401(k) is another “best-in-show” plan. When faced with too many choices, a lot of us become paralyzed with indecision and make bad choices. The average plan offers 20 funds, according to Aon Hewitt, a benefits consulting firm. If you choose to adopt a “strategic moderate” allocation and rebalance on a regular basis, you would see a five percent year-to-date return through August 31, according to MyPlanIQ.įrom an employer’s perspective, offering a large number of funds is desirable - no one can say you didn’t provide ample diversification opportunities - but sometimes the sheer number of funds is daunting. If you don’t want to choose individual funds, you can go with the all-in-one target date funds, which shift allocations to lower stock-market risk as you get older.Īlthough I’d prefer to see even lower-cost, exchange-traded funds, many of the Vanguard funds employ the passive index approach to sample asset classes. The Penn plan is notable for its flexibility. What’s inside Penn’s plan that I like? You can cherry-pick a number of funds such as the Balanced Index (VBINX) for a moderate risk level or invest in emerging market stocks (VEIEX) or REITs (VGSIX). “They are usually pretty complete.” (Disclosure: most of my 401(k) is in Vanguard funds). “Many university deferred or 403(b) plans have low-cost Vanguard funds,” Zhong said. Featuring Vanguard funds, its offerings cover five major asset classes and more than 40 minor ones, according to John Zhong of MyPlanIQ, a service that lists and rates 401(k) and other por t folios. stocks/bonds, international stocks/bonds, real estate investment trusts (REITs), commodities and inflation-protected securities (TIPS).Ī reasonable model would be the University of Pennsylvania’s Basic Plan. In keeping with my “benchmark and balance” strategy, (link) these may be funds that are relatively low cost and that track most of the important asset classes: U.S. Once you convince your employer to shop for another plan, you need some decent, “best-in-show” plans to emulate. The percentage of companies engaging in this practice has dropped to under 10 percent, down from 11 percent in 2009, according to BrightScope, a San Diego-based service that tracks retirement plans. Changes are possible, even when employers are reluctant to do anything.Ĭonsider the idea of placing company stock in 401(k) plans, an idea that became toxic after the Enron-WorldCom debacles. Yet if you can enlist the support of fellow employees, managers and executives by explaining how poor returns eat into their retirement lifestyles, you might gain some traction. You may have to do some internal lobbying to change your plan. It’s expensive to maintain, non-diversified and has performed poorly over the last 10 years. CHICAGO, Sept 5 (Reuters) - Let’s say, after recent fee disclosures from retirement funds, that you have discovered that your 401(k) is a rusting beater of a plan.
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