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401k Underperformance and Allocation

Started by VpR111, November 07, 2018, 12:26:07 PM

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Hi all

Wanted to get the community's advice on this portfolio allocation, which has under-performed  (-1.06%) vs the SP500 YTD. Would you change anything given recent results? Too many picks, too much international or blue-chip exposure? Risk tolerance is high, age 28. The % allocation is below.

VGSNX- Vanguard REIT Index Inst: 9%
VEMRX - Vanguard Emerging Markets Inst. Plus: 2%
Vanguard Inst. Total Bond Index: 2%
VSIIX - Vanguard Small Cap Value: 6%
T. Rowe Price Blue Chip Class T6: 18%
VGTSX - Vanguard Total Int'l Stock Index: 21%
Vanguard Inst. Total Stock Market Index: 33%
VDIGX - Vanguard Dividend Growth: 3%
Vanguard Target Date fund: remaining (employer match gets added to this)

Many thanks for your insights!


I took Warren Buffett's advice and put half of my IRA money in the Vanguard S&P 500 fund.  Well, I guess he actually suggested 90% and put 10% in bonds...  You don't have to worry about under-performing the S&P 500 then :)

I put the other half in the Vanguard Target Date fund for my retirement year.

My personal advice, is that you are grossly overthinking your allocations.  I did that in my 20's, too.  Simplify your holdings, there is no need to have 9+ different holdings.  S&P 500 is essentially a bet on America.  And if America fails, then pretty much all funds are going to fail.  There is a reason why it's a benchmark.  So why would I bother dumping money in to so many other funds and complicating things?


I think it's fine that a diversified portfolio has underperformed the S&P 500 YTD, given how much US stocks have outperformed in that time.

Personally I would consolidate those US equity funds since it seems like you have some overlap between them, that's mostly a personal preference though. I'm 28 too so I haven't lived long enough to see how 401ks actually perform in different conditions :P


Was starting to think the same Cheezus, thanks for the comment. I may keep the international index funds for that exposure however, although they certainly have contributed to this underperformance of late.
This portfolio outperformed the market the past two years so I hadn't changed it, but may be nice to have fewer lines to look at!


Keeping the international could make sense to have some international exposure.  Honestly, this is another one of those "there is no right answer" type things.  I like the advice from Buffett about putting everything in to the S&P 500.  It makes sense.  Professional traders have a VERY difficult time beating the S&P 500.  Consider that.  The entire Buffett bet with the hedge funds, that Buffett won BIG TIME... was that the hedge funds couldn't outperform a simple S&P index fund over a long period of time.  One guy took the bet and failed miserably.

I think the stats are something like 93% of managers don't beat the S&P benchmark!  That means 1 in 20 can beat it.  If these guys barely have a chance, then what makes you think you do?  That's been my thinking.  And then considering the crazy low VOO expense ratio, it just seems like a no brainer to me.


I agree that some consolidation would be beneficial.  I'd keep 3 funds in your 401k: Total Stock, Total Bond and some REITs.

If you have a taxable investment account available (i.e. Vanguard, Fidelity), shift your International exposure there.  You'll benefit from a small tax credit you're not getting by having them in an tax sheltered account.