Mutual Fund Ques

Yeah. What are you doing with your 401K savings? You need to manage the asset allocation of your retirement savings as a single portfolio, even if it's split between different accounts. Personally, if I were married, I would still manage my retirement investments separately from my spouse's, but other people might feel differently about that and want to lump everything together for asset allocation purposes.

-Sandra the cynic

Cynic about having a separate allocation than the hypothetical spouse, but right on target regarding the 401(k)/ Roth. Given the larger portion of the money is in the 401(k), I'd first review the investment options, and start the process there. Some funds may be overpriced (I mean expenses/fees, not price per share) compared to others. My own 401(k) has an S&P fund with a .05% annual charge, but has managed funds that are very overpriced. So I use the 401(k) mostly for that fund, and use the other accounts to diversify. This includes the wife's accounts, so while each account looks loaded one way or the other, all together they are where I want the total portfolio to be.

I'd ask the OP also, does the 401(k) have matching funds and are you putting in enough to capture all the matching?

JOE

Both of these funds omit USA. For completeness, I would think you might also want to consider VHGEX.

Sandra,

RE: Our 401K - we're still contributing to get our employer's match and then some.

I am a bit confussed by what you said in regards to asset allocation. You said I need to manage the accounts as a single portfolio, but then you say you would manage your spouse's seperately. I am not looking at both accounts as a single portfolio. I was looking at my wife's initial mutual fund in her account as a bit 'safer' and more stable than the international fund that I was interested in buying for my initial fund buy in my Roth. In short, my question do you guys consider the international index funds a good investment in my Roth accountas the sole fund for the next couple of years?

Thanks! HH

Sandra Loosemore wrote:

The US is around 45-50% of world stock market indices.

I was under the impression the OP already had a significant exposure to US markets via his wife, so there is no point in doubling up?

I wasn't asking how much money you're putting in your 401K. I was asking what your asset allocation in the 401K is. If you already have all your 401K money in international funds, then it's silly to put your IRA money in an international fund, too.

Most 401K plans offer a fairly limited selection of funds. If that's where you already have the majority of your money invested, then you should use your IRA to fill out any gaps in your existing portfolio or shortcomings in the selection of funds you have available in the 401K plan. Personally, I'm in the opposite position: having changed jobs just a year ago, I have most of my retirement money in accounts other than my current employer's 401K plan, so I've cherry-picked the one best fund from the plan for my current contributions, and restructured the asset allocation in my other accounts to compensate for it.

-Sandra the cynic

I guess that's my overall question. With our 401K accounts and my wife's S&P Index fund, am I not getting a good US market exposure? I don't think there is much international coverage in either 401K account.

Thanks, HH

hh_onl,

When asset allocating ignore the account "types" initially. As some were hitting on earlier, it is important that you allocate across your entire investment portfolio, and not sectionalize by each account type.

Select an asset allocation based on your risk tolerance. FOR EXAMPLE, a simple allocation would be 70% US equities, 20% international, 10% bonds/fixed.

Next allocate it across all of the accounts. This may mean that any single account only satisfies one of your allocation sectors, but OVERALL the accounts should portray 70/20/10. (The Roth may look heavy in a particular sector, but when taken as a whole your portfolio should balance).

If you decide to include your spouse's accounts then their risk tolerance should also be factored. You are doing them an injustice otherwise. If your spouse is onboard with your allocation, but still feels uneasy, then it may help psychologically if the lower-risk investments are in "their accounts"

Adding to this, you could keep an eye oon the future, thinking of where most assets will be when you retire or leave your current employer.

Choosing a company like Vanguard (or Fidelity, T Rowe Price or another large mutual fund company) is a step in this direction. If you chose a mutual fund from a smaller company (with fewer funds), there would be more paperwork/ accounts at other fund companies when you rolled over and needed a proper allocation.

I'd use the Roth or IRA accounts as the "core" holdings as much as possible, with 401k accounts being complimentary as much as possible. The Roth you will own for your "whole life" and the 401k may come or go- and get rolled over a few times probably (as a previous poster alluded to). Realizing that **most** of your curent assets are in the

401k, you (as well as myself and many others) may have more assets in 401k.

For this reason, you may duplicate holdings in the IRA, with the eye that eventually the Roth holding will be a larger position than when you first opened it.

I also agree you should determine your allocation- what % in each of these

domestic large cap growth domestic large cap value domestic mid cap (optional) domestic small cap growth domestic small cap value "total domestic equity allocation" international large cap international small cap "total international equity allocation" bond fund (optional) bond fund (optional) "total bond allocation"

I think it is reasonable to have up to 30% of your equity fund holdings in international equity funds.

However these funds have done well, of late, because of the weakness of the US dollar rather than because foreign stocks have necessarily done better than American stocks (some have, some have not). I don't expect that to revert, any time soon, but if Warren Buffet announces that he is no longer bearish on the US dollar, I would pay attention (he has a longstanding bet against the US dollar, holding 20% or so of his assets outside the US for the first time in his 50 year investing career-- it hasn't really paid off for him, but I trust his reading of the fundamentals. You can see his opinions in the annual Berkshire Hathaway report, which is worth reading for any investor, in any case).