401K Investing: (How Should I Invest In My 401K?Real Example Of 401K Portfolio and Allocations) My 401K Investments and Allocations. Free spreadsheet Included
You can follow the links here to download the spreadsheet:
Video Outline and Time Stamps so you can quickly jump to any topic:
• How many funds I currently own in my 401(K) – 1:07
• My 401k investment allocations – 1:45
• How much of my 401k is in stocks – 2:50
• Why i’m invested this way in 401K – 4:15
• The downsides of my investment allocation – 5:40
• My 401K Fund performance – 7:30
• How much i contribute per month to my 401k – 8:10
• Other factors to consider before investing in 401k – 9:50
My current complete 401(K) Investing Playlist:
How many fund should I own in my 401k?
I currently own 5 mutual funds. I used to own four. The financial advisor that comes to my firm encouraged me to invest in non domestic equities so I started allocating future contributions into this new fund. As you can see here I have about 15% of my portfolio in Non U.S Equities.
How do I allocate my 401K funds?
Asset Allocation – As you can see 80% of my current holdings are in large growth “Blue Chip” type of mutual funds I’ll explain why in a moment. I own 97% stocks in case you are wondering. I’m not big on bonds at the moment.
There is certainly some overlap between the two funds in terms of having similar investments, but I’m ok with that as long I believe that the companies within the fund is invested in are solid companies.
Why I’m currently invested this way? There are a few reasons I’m invested this way. I want to take a moment to explain why that is so you can understand my mindset.
– Age 33 years old at the time of making this video. I can afford to take risks. Especially since I plan on working at least another 30 years. I need this money to grow.
– We have other investments. We have a brokerage account and 2 Roth IRAs that we consistently invest in each month. In those accounts we primarily invest in dividend paying blue chip stocks, REITs, etc. Are investments are more conservative in these accounts which is why I’m so focused at achieving growth in my 401(K)
The downsides of my currently investment allocation – When the stock market finally does crash my investments are doing to go down pretty hard, possibly more than the S&P 500, because my portfolio’s beta is slightly higher than 1.06.
I know we are due for a major correction or crash, but I am totally ok with this at my age. I would love to this thing crash while I’m still young. I’m going to keep investing either way, because it is nearly impossible to correctly time the market. The good news is my current portfolio’s sharpe ratio is slightly better than the S&P 500.
How are my 401K funds performing?
Obviously we have been in a bull market for around 10 years now so my investments have been performing well. I’ve been able to achieve around a 10% return or higher every year on my investments. In 2017 I had a total return of 28%. I realize these results will not last forever, but they are good for now. YTD performance for 2018 is around 10%
How much I contribute to my 401K per month?
Currently I contribute $1,000 per month to 401(K). When I first started I think I only contributed about $300 per month. Plan to keep increasing this amount overtime by $100 per year if possible.
Why do I not max out my 401K?
I want to stay flexible with our investment choices outside of our 401K) plans. I can go into more detail on this in a future video with you guys.
Will these 401(K) Investment allocations change overtime?
Yes, my next move is to allocate future contributions to a small cap growth fund. Small-caps have been doing pretty well in my opinion. Maybe 5 – 10%.
Other important factors we take into consideration before we invest in our 401(K).
Things to consider before investing in your 401K
– The ability to save 25% – 50% of our net monthly income after 401(K) contributions. This very important to us, because if we can save and invest 50% of our income throughout our life we have a good shot at building wealth, and having a good retirement.
– No debt besides mortgage. If I had other debt I would probably not be investing as heavily.
– About 20% of our net worth is in cash so we can take advantage of a market crash, especially in the area of real estate.
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LEARN MORE ABOUT: 401k Plans
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When it comes to investing for retirement, 401K plans are one of the most popular options for many Americans. A 401K plan allows employees to contribute a portion of their pre-tax income to a retirement account, which is often matched by their employer. With the potential for compounding interest and tax benefits, 401K plans are an important tool for building a secure retirement.
One of the most common questions that arises when it comes to 401K investing is, “How should I invest in my 401K?” There are a variety of investment options available within a 401K plan, including stocks, bonds, and mutual funds. The key to successful 401K investing is to create a diversified portfolio that aligns with your financial goals, risk tolerance, and time horizon.
When it comes to creating a diversified 401K portfolio, it’s important to consider asset allocation. This involves spreading your investments across different asset classes, such as stocks, bonds, and cash, in order to manage risk and capitalize on potential returns. The specific allocation that is right for you will depend on factors such as your age, retirement timeline, and risk tolerance.
To illustrate the concept of asset allocation within a 401K portfolio, let’s take a look at a real-life example. Imagine a 35-year-old investor with a moderate risk tolerance who plans to retire at age 65. This investor’s 401K portfolio might look something like this:
– 70% stocks: Stocks have historically provided higher returns over the long term, making them an important component of a retirement portfolio for a young investor. This portion of the portfolio might be invested in a mix of domestic and international stocks, as well as large-cap and small-cap companies.
– 25% bonds: As the investor approaches retirement, they may want to start shifting some of their investments into bonds, which tend to be less volatile than stocks. This portion of the portfolio might include a mix of government and corporate bonds, as well as bond funds.
– 5% cash: Maintaining a small portion of the portfolio in cash or cash equivalents can provide stability and liquidity, making it easier to access funds in the event of an emergency or market downturn.
It’s worth noting that this allocation is just one example of how a 401K portfolio might be structured. The specific allocation that is right for you will depend on your individual financial situation and investment goals.
Ultimately, the key to successful 401K investing is to regularly review and rebalance your portfolio to ensure that it remains aligned with your goals and risk tolerance. Working with a financial advisor can also provide valuable guidance when it comes to creating and managing a 401K portfolio.
In conclusion, investing in your 401K is an important part of preparing for a secure retirement. By creating a diversified portfolio that aligns with your financial goals and risk tolerance, you can make the most of your 401K plan and set yourself up for a comfortable retirement. Remember to regularly review and rebalance your portfolio, and consider seeking professional financial advice to ensure that your investments are on track.
What about investing in retirement ?
Can you do another video on this same topic? (Update) Also, why not ROTH 401K?
This video is helpful!
Isn’t 90% in stocks too aggressive?
great informational video. im 26 and starting a new job. this helped me understand my offer benefits. thank you!
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Templeton has done worst of the major ones in international funds. shame. over 3% down in last 5 years as well. why would any advisor recommend it just 3 years ago? YTD its down 13%
Hi. Loved your detailed videos. I started investing in my late 20's and I am 35. I have fidelity target fund 2050(93% invested in stocks, and 6% invested in bonds). I want to move away completely from target fund to S&P500. Do You think this is the right time to do it(Since market is coming back up) or should I wait out to move away from target fund at later date. Thx again.
Can you show the difference with investing in 401k (index fund portfolio) over 30 years – Specifically, if one invest 10% of his or her income early in a bear market (where shares are purchased at a lower price early in their career) vs. buying during a bull market (where the same 10% is invested during periods of high growth, but shares are priced higher). I think this would be an awesome video and I thank you for all the knowledge you continue to share- I've learned tons and recently increased my 401k contribution during the recent market downturn.
Great article. I wasn’t smart enough to begin investing in a 401(k) when I started my first job at 19 but I did so when I was 27. Joining the civil service forced me to be more careful with money to be able to maintain my clearance. My husband and I fully maxed out both of our Roth 401(k)s and Roth IRAs and later on down the road I expect to get full retirement. It feels like I’m always trying to play catchup but someone I work with said that the retirement alone is worth more than $1 million over a 30-40 time period. When I invested my money initially, I met a cryptocurrency broker who helped me invest my 15,000$ in a forex trade, I was very skeptical about making any deposits but somehow I got convinced and decided to try my luck. I was appalled when I saw my money blossom into 145,000$ in just a week, this was when I started recommending others in search of where to invest their 401k like myself. I have gone full time into trading with Chris (my crypto broker) and ever since my life has not been the same. If you need more details on secure cryptocurrency investment you can text him on WhatsApp +1(347)201-0316 or Email him at Cryptoinvestmentyield gmail com
Nice job , lol I have 2 of those same funds blue chip and contra
Mike, I just enrolled in my companies 401k plan. I am spread out 25/25/25/25 in funds. Two in large funds and two in mid. I am currently set up to contribute 6% since that is the max my company matches. I could be putting a larger percentage in but was interested in getting into individual stocks on my own. Should I look into increasing the amount I put into my 401k and focus on that investment or test the waters with solo investment? Maybe a bit of both? I am 23…any advice is appreciated, thanks!
great
Hey Mike I have a question. Currently I’m on the wealth accumulation stage at 30 yo.
Right now my 401k is on a vanguard target fund but I realized 10% of it is on bonds. I wonder if it would be a good idea to to roll it over to a S&P500 option that I do have available? I don’t mind the risk since I have decades to retire.
I really like your videos, helping me understand more! Have a question about bond index funds in a 401k, the balance goes up/down every day as the daily unit price fluctuates, will we also receive a periodic interest payout or is the growth only based on the unit price increasing/decreasing?
Very helpful. Thanks a lot
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Hello, what are your thoughts on passive funds versus active funds? I'm currently doing 80% allocation to a passive fund and 20% to active funds due to fee's "I hate fee's". Unfortunately, my current company only has mutual funds to choose from. I'm doing 80% in FXAIX which is my passive fund. 7% PESPX which is a mid-cap blend. 6% in CSRSX which is my real estate fund and 7% in JGMNX which is my small cap fund. Out of all my funds available, these are my top 4. There is no overlapping amongst these funds which I like and of the 20% active none of them are above 1%. What are your thoughts on allocation % for passive vs active?
Curious how much you have now? I had around $120,000 in April 2018. Today it's at $109,000. I also contributed around $8,000 for the year 2018.
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Your 401(k) mutual fund picks are really not "good fund choices" but then again you did not list all the mutual fund options available in your 401(k) for comparison. It would be helpful if you did list the tickers of those options.
The one index fund JETSX you have has a horribly high expense ratio of 0.51% and it comprises only 6% of your 401(k), less of your overall portfolio. A similar total US Stock Market index fund can have an E.R. of 0.04% Oddly JETSX doesn't even show up on Morningstar.com and barely on Yahoo.
You stated that an adviser pushed international and you ended up with TEMWX which has an E.R. of 1.05% and levies a 5.75% front end load. Hopefully you did not pay this load otherwise it means the advisor pushed it to pocket the 5.75% commission from you.
What were your other mutual fund choices in your 401(k) plan?
Good fund choices and explanations. Most investors should be more agressive with 401ks because of the dollor cost averaging factor, this reduces some of the volatility. In addition all investors should invest the amount needed to get the full company match if offered. Thanks for your videos!
I have Fidelity ContraFund as well!!! I love them, great track record. I'll be using them for the long term. And I also love large cap / blue chip growth funds. There is overlap with most but its awesome how transparent you are. I might have to share my strategy and allocation as well 🙂
I have T.Rowe retirement 2050 and 2055 but believe by July 2 they will change the plans they offer us. I decided to get J.P Morgan large Cap Growth ( JLGMX) last month to see how that goes. I think I saw 18% growth in the last 2.5 years. I am putting about $13,000 this year into my 401k since I am 35 and feel like I am behind. I do manage to save about 20% of my income.
I'm huge fan of dollar cost averaging as well.
**Would love to hear what you are doing within your own 401(K) or any other opinions or questions you have when it comes 401(K) investing*** My complete 401(K) investing playlist can be found here:https://www.youtube.com/playlist?list=PLSofnwEEZdUyA9zJ6dpNRm-rOxsG515C8
Wasup everybody thank you so much for the love and support. Hope you guys enjoy the crazy amount of transparency I put in this video. Good or bad these are the investments. Please note this video is really not about what to invest in, but more so "why" I invest the way I do in my 401(K).
According to the financial advisor at my firm he says I have one of the best performing portfolios in my entire company so my picks seem to be working so far. Fees in this portfolio which I forgot to mention is about 1% which is on the high side. Really high fees would be 2% in my opinion.
Investing in your 401(K) doesn't have to be complicated, and hopefully by seeing this example you will notice I try to keep things pretty simple.
Video Outline and Time Stamps so you can quickly jump to any topic:
• How many funds I currently own in my 401(K) – 1:07
• My 401k investment allocations – 1:45
• How much of my 401k is in stocks – 2:50
• Why i'm invested this way in 401K – 4:15
• The downsides of my investment allocation – 5:40
• My 401K Fund performance – 7:30
• How much i contribute per month to my 401k – 8:10
• Other factors to consider before investing in 401k – 9:50
Great video! I love how much detail you shared. I’m sure this will really help some people! It can be overwhelming for new people to figure out stuff like this.
Another item to keep an eye on when choosing your investment inside your 401k is the expense ratio of the fund. This could end up costing you thousands of dollars if the expense ratio is high (around 1%). Great video!
Love how transparent this video is – I really haven't seen anyone else go this into detail on their 401k. Thanks for posting!