Review my 401k?

Question

I currently invest 4% per paycheck in my 401k and my company matches 3%. This is the maximum amount they will match. I'm 28 and have been in the company for 2 years. aggressive investment.

The current balance in my 401k is $13,436.68 and is invested as follows:

* AMER FUNDS GRTH FUND A 21.00 %

* PIMCO TOTAL RET ADMIN 30.00 %

* JP MORGAN SM CAP VAL I 7.00 %

* JULIUS BAER INTL EQTY A 14.00 %

* SUNAMERICA FOC SMCAP GR A 7.00 %

* LSV VALUE EQUITY FUND 21.00 %

This allocation brought me a return of -7.82% for 2007 (which sucks). Can someone recommend how to better allocate my money...it's with AIG and the other accounts I have to choose from are:

T. ROWE PRICE RTMT 2010-2055

JANUS ADV RISK MGD GR 1

T. ROWE PRICE RTMT 2045

VANGUARD 500 INDEX S

NEUBERGER BER SOC RES INT

VALIC FIXED-INTEREST (which guarantees 4.47%)

SCHWAB PCRA ACCOUNT

Answer 1

I must say that I agree with Pag (again).  You can learn to do this yourself.  While you are learning, an Index Fund will follow the market and is usually a good type of fund for a beginner to invest in, as long as you follow Pags advice.  That being said, I don't believe that you are contributing a high enough percentage to your 401(k).  You can go to HR and have them "run the numbers" so that you can see how larger contributions would affect your take home pay.  If you are close to the tax bracket limits, your take home pay might even go up with a higher contribution.  Ours did.

Answer 2

The general idea of your investments is good. But I would get rid of all these funds you have and pick index funds preferably from Vanguard, if they are available in your 401k plan. On average mutual funds do not outperform an index, but they charge you money for trying to do so. Even managers who have outperformed for 20 years have lost their edge. This makes it very difficult to pick the right funds. Therefore, index funds are much better. They will perform as well as the market - nothing more and nothing less. But they do so with low fees.

For example, the JP Morgan Small Cap Value Select Fund charges 0.65% management fee and has a 0.99% expense ratio. The Vanguard Small CAp Index Fund has a management fee of 0.19% and an expense ratio of 0.22% - 1.23% less. The JP Morgan guys have to earn 1.23% more every year to make the investment worthwhile for you. This is unlikely. The JP Morgan Fund has returned 10.29% annually over the last 5 years while the Vanguard Fund has returned 10.86% which is 0.57% more, but Vanguard charges you 1.23% less. So, the total difference is 1.80% every year for 5 years. This example shows clearly why index funds are usually the best choice for most investors. (I picked the JP Morgan fund randomly from your list.)

Answer 3

This is something that you can learn to do instead of asking.  Look for funds that have a good track record for the last 10years at least.  Look at how long the management team have been with the fund.  If they've been with them long term then stick with them.  

Don't:

Don't make decisions when if you are nervous (when you are panicing) you'll make dumb decisions.  Don't sell because the market is going down.  You bought high don't sell low.  The market will come back up.  

Do:

Look longterm, you are 28 you have time for these funds to grow.  Keep investing, sounds like you make some good money invest more now.  Think of it as if they are on sale.

Answer 4

I've lost a lot more than you, but I'm keeping the bulk of mine in small cap stocks - I am forcing myself to believe the market will recover someday and staying it I'll be lowering my costs thru dollar averaging and will get higher returns as a result, because I'll be there at the beginning of the next bull market  - otherwise I may be forced to work until I die instead of retiring early like I want to

Answer 5

hello - i agree with both prior posts, take the time to learn about this and you will always get value from it.  dont sell low, dont panic, it will go back up, and you do have time.   good luck