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General Investing => Stocks And Index Funds => Topic started by: VpR111 on November 07, 2018, 12:26:07 PM

Title: 401k Underperformance and Allocation
Post by: VpR111 on November 07, 2018, 12:26:07 PM
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!
Title: Re: 401k Underperformance and Allocation
Post by: Cheezus on November 07, 2018, 12:52:00 PM
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?
Title: Re: 401k Underperformance and Allocation
Post by: hyperobjeckt on November 07, 2018, 01:53:35 PM
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
Title: Re: 401k Underperformance and Allocation
Post by: VpR111 on November 07, 2018, 02:09:58 PM
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!
Title: Re: 401k Underperformance and Allocation
Post by: Cheezus on November 08, 2018, 06:42:22 AM
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.
Title: Re: 401k Underperformance and Allocation
Post by: Dario33 on November 08, 2018, 07:36:21 AM
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.