Aniviel
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Cash: $ 0.45
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Joined: 29 Jun 2011
Location: Texas
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Hi all! I am 22 and my fantastic summer internship has given us the opportunity to set up a 401k. I am almost totally ignorant of this stuff, so please forgive yet another newbie post asking for allocation help. I am ready and willing to read up on these options myself, but I have no idea what I should be looking for in a fund.
Obviously I'm young enough that my risk tolerance is high; additionally, this internship ends in the fall, so in the short term I'm not playing with a lot of money anyway.
My options are:
Franklin templeton mod alloc r
The hartford money market r4
The hartford cap appreciation r4
Pimco total return r
Allianz nfj small-cap value r
Eaton vance inc fund of boston r
American funds cp wld gr inc-r1
Pioneer emerging markets r
Fidelity advisor levrgd co stk t
American funds gr fd of amer r1
Allianz nfj dividend value r
Janus forty r
American funds europac growth r1
Janus enterprise r
Janus overseas r
Ssga s and p midcap index z
Ssga russell 2000 index z
Ssga s and p 500 index sec lend
Lord abbett small cap blend p
T rowe price retire 2050 r
T. Rowe price retire 2010 r
T. Rowe price retire 2020 r
T. Rowe price retire 2030 r
T. Rowe price retire 2040 r
T. Rowe price retire income r
My total income for the summer will be around $10000 (before tax) and I have currently (arbitrarily) chosen to contribute 3% to pre-tax and 3% to Roth. If I take no action to manage my plan, 100% will be put towards the Franklin Templeton fund at the top. My company does not match until a year in and I will have two more semesters of school to pay for, so I don't see any reason to contribute more.
I'd love to hear anything from general advice to a specific example allocation. Right now the list is dauntingly large but given an idea of what to look for I hope to use this plan to learn more about what many of these funds are.
Please let me know if there is any information lacking, and thank you in advance!
-Aniviel
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Wed Jun 29, 2011 3:15 am |
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oldguy
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Location: arizona
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I would put it in the TR Price2050. That fund is diversified over the entire 7000 stocks of the US Stock Market - large, medium, small - plus a mix of International stocks. And as the name suggests, it is allocated to fit the needs of a person who will retire in about 2050, and it is re-allocated in real-time as you grow older.
Good job on getting involved now while time is on your side - it's important. Eg, if you can invest $5000/yr at 11%/yr form now to age 65 it will be $4,440,000. But if you wait 8 years to get started (age 30) you will have $1,890,000. The power of compounding is often a surprise to those who hadn't considered it before. (When Einstein was asked about the worlds most important equation he said 'compound interest'.)
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Wed Jun 29, 2011 1:28 pm |
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Aniviel
New Poster
Cash: $ 0.45
Posts: 2
Joined: 29 Jun 2011
Location: Texas
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Thank you for the suggestion oldguy; that does seem like an easy one I don't have to think about. 
And thanks for the math! I understand the concept of compound interest but I am woefully ignorant of the practicalities of investing. Is 11% meant to be a reasonably achievable return? I actually have a pretty thorough spreadsheet mapping out my retirement. My calculations are based on an 8% rate of return on investment, but bumping it up to 11% takes 15 years off my plan. Of course the thing is wildly inaccurate because it stretches so far into the future, but I take perverse pleasure in playing with the numbers and planning my retirement home. 
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Sat Jul 02, 2011 2:31 am |
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coaster
Senior Advisor
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Location: Wisconsin
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You're better to take the conservative figure, then anything extra is gravy.
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Sat Jul 02, 2011 2:49 am |
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oldguy
Senior Member
Cash: $ 309.10
Posts: 1480
Joined: 21 May 2006
Location: arizona
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quote:
Is 11% meant to be a reasonably achievable return?
That is the longterm (30+ years) average of the total US stsock market. There are many 10 yr periods where it may average only a couple %/yr - eg, the 'market' was flat from 1966 to 1981 - and then again from 2000 to 2010. But even with those periods averaged in, the 30-year blocks of time stay at 10% to 12%. Obviously that doesn't mean that YOUR 30-yr block can't different, the future is always an unknow. But, even if your 30 yrs only averages 8%/yr, that is still a success - and a WAY better chance at prosperity than a 2% CD.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
You can check a few 30-yr blocks on this web-site. The most recent 30 yrs, ending in May, averaged 10.95%/yr. So anyone that incrementally put $5000/yr into the SP500 starting in May 1981 is now a millionaire.
Also note that a longterm investment requires that you allow time for the statistical averaging to occur. As you'll see, 11%/yr is typical for 30-yr blocks. But you can find 10 or 15 or 20 yr blocks that are far lower, or higher. There was one where we had 18 yrs of 18%/yr growth - if I recall it was roughly 1981 to 1999. Using the Rule of 72, you can see that we were doubling our money every 4 years. So, 2X in 4 yrs, 4X in 8 yrs, 8X in 12 yrs, 16X in 16 yrs. So $10,000 would grow to $160,000 in 16 yrs. 
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Sat Jul 02, 2011 1:06 pm |
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