Investing in My Roth 401(k)

Investing in My Roth 401(k)

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401(k) The Playlist Here.

Video Below!

 

It is important to begin Investing, but always do the following;

#1 Pay Off High-Interest Debt First (Anything Over 5%) School Loans, Credit Cards, Etc. 

#2 Create Your Rainy Day Fund at least 3-6 months of living expenses. This will cover the essentials (Shelter, Food/Water, Utilities).

 

 

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Investing in My Roth 401(k)

We already covered the differences between 401(k) & Roth 401(k) Here,

 

 

What Am I Screening For:

I want to get a good deal when purchasing a Mutual Fund or ETF inside my Roth 401(k), so I will be looking at the following.

  • Annual Operating Expenses? – What it cost the investment company to operate over the course of a year.
  • Expense Ratio – Annual fee based on the value of its assets over the year, while small it can impact over time.
  • How long has it been around? I want a fund with some history and has gone through a downturn.
  • 5/10-Year Avg – Keep Up With S&P 500 7-10% + Dividend Yield.
  • What % of Bonds, Stocks, Etc does it hold?

The Average Mutual Fund expense ratio is .74% in 2016, which means for every $1,000 it would cost you $7.40 in annual fees.

The Average ETF expense ratio is .24% in 2016, which means for every $1,000 it would cost you $4.40 in annual fees.

 

 

Fund Options In My Roth 401(k):

My default option is BlackRock LifePath Index 2050 Portfolio (K).  I’m going to be customizing and listing all my options below.

Guaranteed Account or Money Market (1):

  1. CUNA Mutual Stable Value:
  • Cur Rtn YTD: 1.5%
  • 5Yr Annual: 1.79%
  • 10Yr Annual:: 2.56%

 

TARGET DATE FUNDS (10):

Target Retirement Date Account or Target Date Fund (TDF) is an individual plan investment line-up fund with underlying fund allocations that change over time-based upon how near you are to your targeted retirement date.

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
BlackRock LifePath Index Retire K 9.06% 5.83% N/A 5.64% 0.18% 0.11%
BlackRock LifePath Index 2020 K 10.18% 7.03% N/A 6.28% 0.17% 0.12%
BlackRock LifePath Index 2025 K 11.86% 7.97% N/A 6.88% 0.18% 0.12%
BlackRock LifePath Index 2030 K 13.33% 8.81% N/A 7.39% 0.18% 0.12%
BlackRock LifePath Index 2035 K 14.76% 9.55% N/A 7.85% 0.19% 0.12%
BlackRock LifePath Index 2040 K 16.05% 10.25% N/A 8.29% 0.20% 0.12%
BlackRock LifePath Index 2045 K 16.99% 10.82% N/A 8.59% 0.23% 0.12%
BlackRock LifePath Index 2050 K 17.20% 11.22% N/A 8.79% 0.23% 0.12%
BlackRock LifePath Index 2055 K 17.25% 11.56% N/A 8.98% 0.31% 0.12%
BlackRock LifePath Index 2060 K 17.22% N/A N/A 19.92% 0.32% 0.12%

M1 Finance

ASSET ALLOCATION FUNDS:

Target Risk Allocation Account or Multi-asset class allocation fund is an individual plan investment line-up fund with underlying fund allocations to achieve goals of a particular tolerance for market risk or volatility.

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
CUNA Mutual Lifestyle Aggressive 14.45% 9.07% 5.02% 0.21% 0.00%
CUNA Mutual Lifestyle Moderate 11.55% 7.15% 4.81% 0.21% 0.00%
CUNA Mutual Lifestyle Conservative 8.79% 5.24% 4.51% 0.19% 0.00%
CUNA Mutual Lifestyle Income 5.51% 3.34% 4.14% 0.21% 0.00%
CUNA Mutual Diversified Equity 17.44% 10.72% 4.81% 7.04% 0.32% 0.00%

Bonds:

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
Vanguard Total Bond Market Idx InstlPls 3.28% 1.99% 4.14% 3.42% 0.03% 0.03%

Large-Cap Stocks:

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
Vanguard Growth Index Institutional 23.77% 15.82% 8.83% 6.50% 0.05% 0.05%
Vanguard Value Index I 11.48% 14.56% 6.45% 6.49% 0.05% 0.05%
Vanguard Institutional Index Instl Pl 16.89% 15.17% 7.54% 7.28% 0.02% 0.02%

Mid/Small-Cap Stocks:

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
Vanguard Extended Market Index InstlPlus 14.28% 14.87% 8.18% 11.69% 0.05% 0.05%

International Stocks:

Fund Name YTD 5 Year 10 Year Since Inception Operating expense Expense Ratio
Vanguard FTSE All-Wld ex-US Idx Instl
Prospectus | More Information
23.88% 7.65% 1.19% 2.59% 0.10% 0.10%

 

 

 

Consider The Following Example:

I skipped Guaranteed Account or Money Market, Target Date Funds, Asset Allocation Funds, and Bonds.  These all had double or triple Operating Expenses and had the same returns as stock options.  I looked at Large Caps & Small Caps, the ticker symbols were VEMPX, VIIIX, VIVIX, VIGIX.

I used the following website to analyze the funds quickly, Here

After reviewing these for their Performance, Risk, Assets I took a deeper dive inside to see which stocks they held and the overall rating.  Vanguard Institutional Index Fund (IP) VIIIX was the winner. It did rate a bit lower on the YTD & 10 yr then the Vanguard Growth Index Fund (I) VIGIX, but I believe the slightly lower fee’s and a higher yield will allow VIIIX over the long term to have less money cut out, earn more money with dividends and allow itself to compound a bit faster over time.

 

Do you think I made the right choice with Vanguard Institutional Index Fund (IP) VIIIX?

 

I Hope You Enjoyed This Article.

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I want to know what’s on your mind and get ideas on how you are planning on investing in your future.

 

We Covered Investing in My Roth 401K!

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