I'm interested in managing my own 401k investments. I was hoping to get some advice about how to distribute my 401k investments.

I'm interested in managing my own 401k investments. I was hoping to get some advice about how to distribute my 401k investments.
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#1

I have absolutely no experience in investing and I just started doing my own research and learning.
I started my 401k in June, but it was in a retirement portfolio and my statement shows a net loss since I started. A bit about me: I’m 30 years old, no loans/mortgage/debt, $120K annual salary, have $18K saved up in a money market savings account, and no other investments. My company matches up to 4% of my contribution so I’ve only contributed 4% of my salary. We can contribute up to 10% max into company stock. Please feel free to ask if you need more information from me.The various indices and stock options are listed below. We have to distribute in increments of 1% and it must total 100%. Thanks so much in advance for your input. S&P 500 Index FundRussell Small Cap Completeness Index FundBond Index FundInternational Stock Index FundStable Value FundBond FundLarge Company Stock FundInternational Stock FundSmall/Mid-Size Company Stock FundReal Asset Fund


#2

Hello.

Thank you for providing the detailed information.  You are wise to begin planning your retirement future carefully.  The following are some thoughts that I hope will get you pointed in the right direction.

  • The “secret” to a secure retirement is to save as much as you can as early as you can.  While it is always a good idea to contribute at least enough to one’s 401(k) to receive the full employer match, the IRS provides a tax incentive to contribute beyond that amount as well.  The 2015 salary deferral limit for participants under age 50 is $18,000. 

A Guide to Jumpstarting a Retirement Plan in Your 20s– Forbes

Every 25-Year-Old In America Should See This Chart

Retirement Planning for 20-Somethings - Bankrate.com

  • Understand that volatility is your friend when you are beginning to save for retirement.  If you are investing in an efficiently diversified portfolio of mutual funds in your 401(k), there will almost certainly be periods of time when the value of your retirement portfolio declines – sometimes precipitously.  This is both normal and expected and should be viewed as opportunities for your regular salary deferrals to purchase more shares at depressed prices. The fact that your portfolio is down since you started in June is meaningless.

The Market Gives What the Market Gives - Why performance promises and goals are worthless

Don't Make the Trading Gods Laugh (Bloomberg)

Why Market-Timers Go Nuts (Advisor Perspectives)

You are your portfolio’s worst enemy (MarketWatch)

  • You are wise to consider investing in index funds.  There is an enormous body of academic research to support the concept of investing in low cost index funds for long term objectives. 

The Triumph of Index Funds | TIME

Why Index Fund Portfolios Win - Betterment

How to Choose a Mutual Fund - The Motley Fool

Five Bad Ways to Pick a Mutual Fund - WSJ

Choosing Funds: Low Costs or High Past Performance?

  • The wisdom of purchasing company stock in your 401(k) depends to a degree on which company it is.  If the company offers the opportunity to purchase shares at a discount to the market value you may wish to do so.  Generally speaking, however, it is probably not wise to have a concentrated position in any individual stock that comprises more than 10-20% of your total nest egg.  As such, you may wish to periodically pare back this position.

  • In terms of how much to save, the following article from the Center for Retirement Research at Boston College offers some insight to help quantify your thinking - How Much for the 401(k)? Depends.  For more specific guidance, you may wish to test  Nest Egg Guru’s Retirement Savings Calculator .  This application allows you to test how changing variables that are within your control (e.g., amount you save each year, rate of increase of savings, investment allocation, investment expenses, years until retirement, and accumulation strategy) may affect the value of your nest egg at retirement.  Based upon the data you enter, Nest Egg Guru runs 5,000 simulations to produce a reasonable range of values representing a broad spectrum of potential economic environments.  Users are encouraged to pay greatest heed to the bottom 50% of results (i.e., hope for the best, but plan for the worst) and to test how changing the variables that they can control may impact the range of values at retirement.

Hope this information is useful.

Aloha,

JR


#3

There are three things you need to manage to maximize your investment dollars for retirement. First, you need to know your NUMBER. This is the amount of capital required to maintain a sustainable income through retirement. It has to be inflation adjusted to maintain purchasing power at your age today. You said you are earning $120,000 - at age 70 - your likely retirement age, to maintain purchasing power you will need (@3% inflation) $500,000. Obviously, your investments will grow over that period. You should target 80% of that as a retirement income based on academic studies.

Next you have to calculate the amount you need to be saving if you earn 7% to reach your goal. It is probably about 15% at your age. But you need to increase it 3% each year.

Finally, you need to learn how to invest your money. Low fees and diversification are significant elements to your financial investing success formula. So learn from the FOUR professors who received Nobel Prizes for their research showing how to invest with the highest probability of success. Here is a FREE ebook based on their award winning papers outlining their research. It is affirmed by the largest institutional investor in the world, Norway who invests the same way. If you read this book, you will learn how to BE the market instead of trying to BEAT the market, which is impossible.

Also, try this Simple Retirement Calculator. It is designed to help you model retirement by being able to see the effect of changing various assumptions. Play with it and you will see how increasing risk (rate of return) impacts your results. Notice the chart at the bottom tells you how long your money will last with the income you enter.

Hope this helps.



#4

The previous two posts are full of good recommendations.
Let me add the following, please. The individual(s) at your company who sponsor your 401(k) are called fiduciaries. Their decision making about what kind of plan to offer and the investments therein make them personally, financially responsible if their choices are not good ones. (Read, they can be personally sued.)
Anyone who posts here a specific “X% to this and Y% to that” in response to your question has just made themselves an additional fiduciary. It is not a real good business model to put ones self in this position without being compensated to cover our Errors and Omissions insurance costs. I don’t like the situation any more than most plan participants, but that’s what several courts have decided regarding our advice to plan participants. And there is a movement in Washington currently to place advisors under even more regulation regarding investment advice to retirement plans.
At thirty years of age, you should have a long investing future in front of you. Your best solution for your 401(k) and investments in general is to learn as much as you can about investing. Read, take college/junior college courses in investing, do whatever you can yo be able to make intelligent decisions with your money.
I sincerely wish I/we could be more helpful with answering your question. But you may now see why our reluctance to give you specific direction.


#5

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