Ask HN: Where do you keep your 401k investments?

https://news.ycombinator.com/item?id=40938783

by monroewalker • 2 years ago

33 69 2 years ago

news.ycombinator.com

I've had mine in the default target retirement funds of the provider (Fidelity / Empower / Vanguard) from different employers. After seeing how much of the fund is invested in bonds (10% for Vanguard) despite the long time until retirement, I'm looking at moving everything to VOO / VTSAX / VFIAX to have a more aggressive allocation in 100% equity.

Curious what others here have opted to do.

nullindividual3• 2 years ago

Have a financial advisor manage it on my behalf. They know the schedule of risk, but at least a portion of it will be in Vanguard (Fidelity), slowly phasing out stock for bonds as I become a decrepit cripple.

HenryBemis• 2 years ago

Got an idea how much he/she/they are charging you in fees?

nullindividual3• 2 years ago

0.9% of managed assets.

nosefurhairdo2• 2 years ago

- he/she/they

+ they

techniquetech3• 2 years ago

was in similar position -- rolled all previous employers into vanguard IRA, self directed; VTI, NVDA, JPM, COST, MRK...

have not regretted decision to take direct control

p1esk• 2 years ago

How do you choose the companies?

twitexplore• 2 years ago

Looks like they read Jim Cramer's Mad Money book: choose 5 diverse companies and research them about an hour a week.

thephyber• 2 years ago

Are you listing all of the stock tickers you invested in, or are we only getting a curated subset?

People overestimate their ability to pick stocks when they are up. Not everyone gets lucky.

(For the record, I am up a lot but I sold my NVDA way too early to take advantage of the current hockey stick)

techniquetech3• 2 years ago

I listed the largest positions accounting for majority of $ invested and majority of portfolio.

I definitely have other bets which did NOT work out; FSLY -90.58%, ZIZTF -76.81%. These were smaller bets, I'm still bag holding hoping Nightingale turns it 'round @ FSLY.

I recently exited AAPL in May, which turned out to be a poor move.

I'm definitely NOT great at picking stocks and I probably do overestimate my ability. Look at my horrible FSLY pandemic trade.

Taking direct control and responsibility has been a good learning and overall financially rewarding experience for me.

publicdaniel• 2 years ago

One downside of rolling it into an IRA is that you'll pay more in taxes to do backdoor roth IRA conversions every year. I think it's better to leave it in 401k if the fund options / fees are acceptable.

erik_seaberg• 2 years ago

Another is that 401(k) accounts are protected from creditors by federal law, where IRAs vary by state.

runjake• 2 years ago

Vanguard. Fidelity has some nice low-cost index funds in the style of Vanguard, as well.

caprock• 2 years ago

I have a traditional IRA account at one of the major brokerages, and I roll-over each employer 401k to that account when I'm done with that employer. Then I just invest it in VOO and a couple similar ETFs. Plenty of flexibility and no charges for the purchases.

keernan2• 2 years ago

Vanguard's target date retirement funds furthest from retirement do not have a 100% stock allocation simply because studies have established that a 90/10 stock/bond portfolio outperforms a 100% stock allocation.

bionhoward• 2 years ago

This sounds reasonable and I’m with you, but compelled to ask, which studies, can you provide links?

Knowing those sources could help us find more recent ones citing them, and see how this strategy has held up over time.

Here’s one:

[1] https://www.mdpi.com/1911-8074/14/9/409

keernan2• 2 years ago

If my memory serves me correctly, it was part of the results of the CAPM study by Sharpe and Markowitz for which they won the a Nobel.

snihalani• 2 years ago

Vanguard because it supports passkeys.

If you want that much risk, day trading might be an option

uzername• 2 years ago

I have my 401k managed through Vanguard currently. Previously Principal with a former employer. I have other savings and investment in other providers, managed by a financial advisor.

2OEH8eoCRo02• 2 years ago

I might sound like a bad idea to hold bonds so far from retirement but it can sometimes work out better than solely index funds.

If the market crashes you'll be heavy on bonds and able to buy the dip when you rebalance.

Check this out: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lar...

immibis2• 2 years ago

If the market crashes. My expectation is for the S&P to keep going up to the moon. Maybe with a brief crash at some time, but it's got an entire Congress worth of corruption behind it now. Never bet opposite of people with the power to influence the outcome.

Look what happened with COVID: it crashed, but then politicians immediately and for a long time printed a shitload of money to make it stop crashing. This is the new normal.

Market indices are already at all-time highs, and the Federal Reserve is indicating it may cut rates due to inflation being measured as negative (no matter how it feels in reality for you and I) and the USA is about to have the most pro-pump-and-dump run-the-country-like-a-business president ever (for the second time and not being willing to ) who I completely expect will find even more and better ways to take money from the poor and give it to corporate investors.

Therefore, as much money as I feel willing to risk on this is in broad market index call options. I'm not trying to convince you to buy the same, just stating my opinion.

enceladus06• 2 years ago

S&P 500 has those with nukes behind it. That is all that matters, so 100% VFIAX.

tekla• 2 years ago

Vanguard. It's been doing amazingly

monroewalker3• 2 years ago

Which funds though?

pram• 2 years ago

I rolled all my 401ks into an IRA on Betterment. They automatically buy Vanguard ETFs and some other stuff. Has some nice features like earnings projections and automatically setting your equity/bond composition (like you can set it to 10% bonds and it will automatically rebalance all your ETFs)

zackify3• 2 years ago

If you just rolled your money into vanguard directly, you would avoid the .25% annual fee which is a lot of money compounded over time

etrautmann• 2 years ago

Right, Betterment and Wealthfront primarily only if you don't want to do anything more than shoveling money into a single place.

monroewalker3• 2 years ago

What fees does betterment have if any? What allocations have you opted for?

zackify3• 2 years ago

.25% on top of any investments you have through them, on top of the fund expense ratio https://www.betterment.com/pricing

That is 62k gone to fees assuming:

12k start, 12k put in per year. for 30 years at 7%.

blessedwhiskers• 2 years ago

I actually just left Betterment because over the last few years their Core portfolio has really lagged performance of my non-Betterment investments (largely VTI, VTSAX, VBTLX in approximately 80/20 stock/bond split). Upon ACATS-ing over to another broker, I found they'd purchased some funds with high fees when there were really similar funds available with far, far lower fees. The only reason I can think of to buy a higher expense fund when a much lower expense variant exists is in the name of tax loss harvesting, but even that is a really short-sighted decision.

hanska• 2 years ago

"The only reason I can think of to buy a higher expense fund when a much lower expense variant exists is in the name of tax loss harvesting"

perhaps it's because they receive kickbacks from that specific fund.

crooked-v• 2 years ago

If you're robo-investing, just use the Vanguard robo-investor directly. It has basically the same functionality and lower fees (about 0.15% once you count them crediting Vanguard fund expense ratios).

wombat-man• 2 years ago

I think he's asking more about which funds, but coincidentally I have 401ks at the same 3 places.

Everything is going towards a target date fund in vanguard with a low expense ratio. This should manage the risk for me. I am also contributing pre tax, since I expect to be in a lower tax bracket when I retire.

Oh also, I plan to eventually transfer the other two accounts into my current vanguard 401k. This is different from rolling over into an IRA. I think 401k is better since it has more legal protections

nightski• 2 years ago

Vanguard, but instead of using target date funds I choose the index fund allocation manually. The target date funds basically just hold 4 index funds. If you are in a tax advantaged account, it's pretty trivial to just update those allocations once a year to pay lower fees.

devoutsalsa2• 2 years ago

100% SCHD.

fsargent• 2 years ago

Why Schwab dividend equity etf?

devoutsalsa2• 2 years ago

I like the dividend & the dividend growth. I was 100% VTI, but I'm getting closer to retirement and wanted less exposure to the tech hype. Tech has more volatility than I care for now.

zackify3• 2 years ago

Vanguard target retirement 2060 for 401k / IRA, and 2040 for my brokerage. I try to keep it simple.

Each time I leave a job I roll into Vanguard so I'm not paying more fees each year for no reason.

If you don't want 10% bonds, then use VTSAX maybe.

fastily• 2 years ago

Assuming these are for jobs I’ve left, I’m using Fidelity rollover IRAs, with 100% of the funds in FZROX. It has performed amazingly over the years. I would describe it as the lazy man’s yolo

dheera4• 2 years ago

My 401K as of this moment:

Traditional 401K: 100% GME

Roth 401K: 100% IBIT/FBTC (bitcoin ETFs)

This is not investment advice, but my general rule is to use 401Ks and IRAs for, high-risk, high-gain, short-term, tax-inefficient trades.

My traditional 401K is mostly unvested company match. If GME crashes and I lose all of it, bleh, I change jobs earlier, no big deal. If GME skyrockets, I sell, then stay at my current company and vest that shit.

As for the roth 401K, I believe there is a high chance in BTC going up drastically more in the next 1 year, in which case I'll sell and the government can't lay their rotten hands on a penny of it. If BTC crashes due to some short term economic crisis, I'll just hold until it goes back up some time in the next 25 years, which I believe is nearly certain.

My normal brokerage account is where I do long-term index funds and long-term investments, because they are already taxed much less at long-term rates, and I can sell them at a future time when they would be taxed even less (e.g. hypothetical future gap year with intentionally zero income, hypothetical future time I'm not living in California).

monroewalker3• 2 years ago

I'm sure you're already aware of the general consensus around how speculative cryptocurrency and meme stocks are but it's worth repeating that this is a very dubious approach. On GME specifically, this is a good documentary to watch: https://youtu.be/5pYeoZaoWrA?si=OuRp-NxyiYR8XmA0

I think it's worth it for you to consider reducing your allocation to these even if you have strong conviction in their long term success. If you do 25% GME/crypto and 75% index funds (or target retirement) then you're still going to be doing extremely well if these assets take off as hoped for but you'll be much better off in the alternative and less surprising scenario where they don't

dheera4• 2 years ago

Oof, no. I'm well aware of the advice and I don't agree with it.

I expect GME to crash and burn. I was going to change jobs at some point, in which case my traditional 401K funds will just disappear because they are not vested. If I happen to win the blue moon GME lottery I'll just stay a bit longer to vest the winnings. In my specific situation it's essentially buying memes with someone else's money at zero downside.

As for BTC, I don't use Roth 401K/IRAs as a retirement vehicle. I use it as legal tax avoidance on a very specific high-risk part of my portfolio that is tax-inefficient if it wins. Given the shitty 401K dollar limits I'm not going to put a cent of it toward stuff that's already tax-efficient if I have tax-inefficient stuff outside that can be swapped in.

The vast majority of my net worth is {municipal bonds, index funds, stocks} are all held in a normal brokerage account because they are not taxed as much to begin with. That's my actual stably-growing retirement fund, and much, much larger than my 401K.

This isn't investment advice, but if you are in a job where you are maxing out your 401K but saving much more outside the 401K than inside it, I'd encourage you to consider the math of doing all your index funds outside 401K and whatever high risk plays inside 401K/IRA. You may find the math works out better that way, like I do.

greenie_beans2• 2 years ago

I believe there is a high chance in BTC going up drastically more in the next 1 year, in which case I'll sell and the government can't lay their rotten hands on a penny of it. If BTC crashes due to some short term economic crisis, I'll just hold until it goes back up some time in the next 25 years, which I believe is nearly certain.

curious why you think this?

dheera4• 2 years ago

BTC is highly volatile but it has a more predictable cyclic behavior than any other investment in the past 3 decades, and for largely mathematical reasons.

Even if that cyclic behavior breaks, I think the US economy and foreign policy is so unhealthy right now that BTC is widely becoming a new store of value across the world. It's a lot easier to deal with than gold.

You can believe otherwise; I'm not here to argue, convince, or be convinced, for or against BTC and I'm not a crypto-nut. I'm just de-dollarizing and hedging against uncertainties in the US economy.

If I lose all of it, it's no big deal as my actual retirement fund isn't my 401K, I just use 401K/IRA to churn tax-inefficient high risk stuff.

None of this is investment advice. Do what you believe, I'm just stating what I do.

stuff4ben• 2 years ago

My 401k is at Fidelity and split 80% into SP500 and 20% into the target retirement fund for my age. It was the other way around and like the OP I soon realized how much I was losing. I'll probably ease it back into the target fund as I get closer to retirement.

VariousPrograms• 2 years ago

I am a VTSAX and chill-er. Before doing the math, I spent years with an EFE managed account that would’ve eaten $100,000s in fees over the life of the account, which seems like overkill to shuffle around a few index funds in a 401k. I should’ve become an investment banker.

nosefurhairdo2• 2 years ago

Agree that target date funds invest in bonds too early. I'm 100% in total market index since I'll be in the market for another 25+ years. May shift more towards target date funds as retirement approaches, but haven't thought that far ahead. I subscribe to the Bogle school of thought that low fee total market index funds + time in the market is virtually impossible to beat.

tehlike• 2 years ago

Tqqq

bombcar• 2 years ago

Bogleheads is leaking ...

Just get an asset allocation of index funds you're happy with and roll with it. The "three fund portfolio" is hard to beat for simplicity.

scottLobster2• 2 years ago

50% VTI (US Total Market Index), 25% AVUV (US Small-cap value), 25% AVDV (Developed World Ex-US Small-cap value)

Important to note I still have, if I'm lucky, 35 years or more until retirement. I'm betting the value factor premium will re-emerge at some point during that time. As I get closer to retirement I'll rotate into more broadly diversified/conservative stocks, but I see little point in holding bond funds in a portfolio for my situation.

That's not to say I won't own bonds outright when it makes sense. A good chunk of my security fund is in T-Bills and I-Bonds. But I can say from having lived through market downturns that I don't panic-sell, so the "portfolio stability" argument for bonds is largely wasted on me. In retirement I plan to keep a multi-year cushion in a Federal Asset Money Market account (to avoid state/local taxes) and the rest 100% stocks to maximize total long-term returns.

I'm a recipient of modest generational inheritance myself, my grandparents were dirt poor, my parents made it to upper middle class. It's part of my job to keep the generational snowball rolling for my kids and (hopefully) future grandkids. Particularly if wealth inequality isn't going to get any better.

desmosxxx4• 2 years ago

What's your reasoning for ditching VEA and emerging markets?

scottLobster2• 2 years ago

I ditched large cap international because of the example of the Japanese stock market, where from 1990 - 2019 the Japanese market as a whole stagnated but Japanese small cap value stocks delivered between 5.4% and 8% annualized depending on whose index you're using. https://www.pwlcapital.com/wp-content/uploads/2020/12/Five-F... (Page 19)

Given population demographics, I see most of Europe and developed Asia going the way of Japan and am betting their equity markets will show similar characteristics. Never mind that even during good times there has been a historical small-cap value premium in most of those regions, although not as pronounced as in the US.

Ditching emerging markets is part practical part political. The practical aspect is most emerging market funds have a sizeable allocation to Chinese stocks. Chinese stocks have failed to produce reliable returns and are incredibly distorted by the Chinese government picking winners and losers, sometimes at gunpoint. I don't want to bet my financial future on how Xi feels about his breakfast on any given morning. Additionally, China is a geopolitical adversary. Yes it's impossible to completely cut them out of one's supply chain, but I can avoid directly boosting their financial markets.

As for the few emerging markets funds that don't include China, they include other nations such as Saudi Arabia that I'm hesitant to actively invest in for political reasons. I also think emerging markets in general are going to get screwed for the next few decades as globalization declines, climate change becomes more impactful, and the world generally becomes more dangerous and chaotic. There may be money to be made in EM, but I doubt it will be consistent or as simple as investing in an EM index fund.

andrewf• 2 years ago

Ask yourself whether you want to optimize the P10, P50, or P90 outcome.

neilv2• 2 years ago

Fidelity can do almost everything, and I consolidate there whenever I can. (And an employer's non-Fidelity/non-Vanguard 401k service is actually a reason to look forward to leaving the company, so that I can roll over my 401k treasure to Fidelity.)

The only thing Fidelity couldn't do was way back when I wanted a Solo 401(k) that permitted loans, but they didn't have a prototype plan for that, so I would've needed to find&pay someone else draw up the plan document, to hand to Fidelity.

Fidelity even has HSAs now, and very convenient to buy&sell within them, without the headaches and ridiculous investment options like I had with two other places.

They have most any kind of fund I was aware of. But lately I just stick with the simple low-expense-ratio total-market iShares ETFs, like ITOT/IVV, AGG, IXUS, which have only a negligible fee upon selling. (IIRC, you can also get the Vanguard funds at Fidelity, but my backtesting of ITOT, etc., against Vanguard counterparts looked like they were equivalent.)

Cash in accounts can be moved automatically to/from funds like FDRXX (4.99% yield) or SPAXX (4.96%), and my bank-like Cash Manager account uses an FDIC deposit sweep (2.72%).

dheera4• 2 years ago

Solo 401(k)

If you are self-employed, you can also consider a SEP-IRA, which has similar limits. The only downside is it is only available in traditional flavor, no Roth. You can roll it to a traditional IRA and then do a Roth conversion though.

neilv2• 2 years ago

I initially had a SEP IRA for my consulting income, but the Solo 401(k) figured out to much higher contribution amounts for my circumstances at the time, so I moved.

I've heard mixed things about doing backdoor Roth from SEP IRA.

desmosxxx4• 2 years ago

Have everything in Schwab.

Portfolio is a modified ben felix portfolio with a small allocation to qmom and individual stocks. No bonds

dave333• 2 years ago

Are you old enough to have experienced a bear market? Investing 100% in stocks can suffer big drawdowns when there is an extended bear market say down 40% over several years. I would diversify with small portions (5-10% each) in gold, crypto, bonds and cash. If you are dollar cost averaging into stocks it's important to keep investing when stocks are going down. Also assume you own your own home - if not that should be your first priority.

CottonMcKnight• 2 years ago

VT and chill. Add BND / BNDW if you wish.

Ask HN: Where do you keep your 401k investments?

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