Choosing funds for 401k plan

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
bobblehead54
Posts: 8
Joined: Sun Mar 14, 2021 12:16 pm

Choosing funds for 401k plan

Post by bobblehead54 »

Hi bogleheads,

My company is moving its 401k program to a new provider at the start of the new year. The funds that I currently use are not going to be available with the new provider, so I need your help to find replacements.

I work for a small company of around 100 employees. Under our current system, we have self-directed 401k accounts at the brokerage houses of our choosing (mine is with Fidelity). I have my money invested in the following two funds ( 60%/40% US/Intl ):
FSKAX (domestic) ER: 0.015%
FTIHX (international) ER: 0.06%

The new plan will be managed by fidelity, but will not offer the funds that I currently use. (TBH, I am kind of shocked that they are not offering FSKAX and FTIHX given how widely used and well known they are, but what do I know...) Instead, they are offering the following list of funds. Some of them are actively managed and most of them have higher expense ratios than I am comfortable with. I would like to find funds that are similar to FSKAX and FTIHX (low-cost, well-diversified index funds).

Funds offered under the new plan:

Code: Select all

Asset Class	Fund Code	Investment Name	Annual Gross Expense Ratio
Bond	2418	Fidelity® Inflation-Protected Bond Index Fund	0.0005
Bond	2944	Fidelity® Total Bond K6 Fund	0.003
Bond	2326	Fidelity® U.S. Bond Index Fund	0.00025
Bond	OIJ3	JPMorgan Government Bond Fund Class R6	0.0039
Domestic Equities	OSX7	American Century Small Cap Value Fund R6 Class	0.0084
Domestic Equities	OUBH	American Funds American Mutual Fund® Class R-6	0.0027
Domestic Equities	2328	Fidelity® 500 Index Fund	0.00015
Domestic Equities	2945	Fidelity® Blue Chip Growth K6 Fund	0.0045
Domestic Equities	2352	Fidelity® Mid Cap Index Fund	0.00025
Domestic Equities	2957	Small Cap Growth K6	0.006
Domestic Equities	2358	Fidelity® Small Cap Index	0.00025
Domestic Equities	OVKH	MFS Mid Cap Growth Fund Class R6	0.007
Domestic Equities	OSR1	MFS Mid Cap Value Fund	0.0068
Domestic Equities	OIPN	T. Rowe Price Dividend Growth Fund I Class	0.005
International/Global	OK38	Columbia Emerging Markets Fund Institutional 3 Class	0.0111
International/Global	2348	Fidelity® Global ex U.S. Index Fund	0.00055
International/Global	2953	Fidelity® International Capital Appreciation K6 Fund	0.0065
Money Market (or Short Term)	3067	Fidelity® Government Money Market Fund - Class K6	0.0027
Specialty	OL1K	Cohen & Steers Realty Shares Fund Class Z	0.0087
Target Date	2989	Fidelity Freedom® 2005 Fund - Class K6	0.0037
Target Date	2990	Fidelity Freedom® 2010 Fund - Class K6	0.0038
Target Date	2991	Fidelity Freedom® 2015 Fund - Class K6	0.004
Target Date	2992	Fidelity Freedom® 2020 Fund - Class K6	0.0042
Target Date	2993	Fidelity Freedom® 2025 Fund - Class K6	0.0044
Target Date	2994	Fidelity Freedom® 2030 Fund - Class K6	0.0046
Target Date	2995	Fidelity Freedom® 2035 Fund - Class K6	0.0048
Target Date	2996	Fidelity Freedom® 2040 Fund - Class K6	0.005
Target Date	2997	Fidelity Freedom® 2045 Fund - Class K6	0.005
Target Date	2998	Fidelity Freedom® 2050 Fund - Class K6	0.005
Target Date	2999	Fidelity Freedom® 2055 Fund - Class K6	0.005
Target Date	3000	Fidelity Freedom® 2060 Fund - Class K6	0.005
Target Date	3417	Fidelity Freedom® 2065 Fund - Class K6	0.005
Target Date	3001	Fidelity Freedom® Income Fund - Class K6	0.0037
Right now, I am thinking of the following replacements:

FSKAX:
Fidelity® 500 Index Fund
or
80% (Fidelity® 500 Index Fund) and 20% (Fidelity® Small Cap Index)

FTIHX:
Fidelity® Global ex U.S. Index Fund

Let me know what you think. Also, any idea why there are so few low-cost index funds in this selection? The TD funds are pretty expensive compared with Vanguard's TD funds.

Thanks in advance!
exodusNH
Posts: 10349
Joined: Wed Jan 06, 2021 7:21 pm

Re: Choosing funds for 401k plan

Post by exodusNH »

bobblehead54 wrote: Mon Nov 29, 2021 8:41 pm Hi bogleheads,

My company is moving its 401k program to a new provider at the start of the new year. The funds that I currently use are not going to be available with the new provider, so I need your help to find replacements.

I work for a small company of around 100 employees. Under our current system, we have self-directed 401k accounts at the brokerage houses of our choosing (mine is with Fidelity). I have my money invested in the following two funds ( 60%/40% US/Intl ):
FSKAX (domestic) ER: 0.015%
FTIHX (international) ER: 0.06%

The new plan will be managed by fidelity, but will not offer the funds that I currently use. (TBH, I am kind of shocked that they are not offering FSKAX and FTIHX given how widely used and well known they are, but what do I know...) Instead, they are offering the following list of funds. Some of them are actively managed and most of them have higher expense ratios than I am comfortable with. I would like to find funds that are similar to FSKAX and FTIHX (low-cost, well-diversified index funds).

Funds offered under the new plan:

Code: Select all

Asset Class	Fund Code	Investment Name	Annual Gross Expense Ratio
Bond	2418	Fidelity® Inflation-Protected Bond Index Fund	0.0005
Bond	2944	Fidelity® Total Bond K6 Fund	0.003
Bond	2326	Fidelity® U.S. Bond Index Fund	0.00025
Bond	OIJ3	JPMorgan Government Bond Fund Class R6	0.0039
Domestic Equities	OSX7	American Century Small Cap Value Fund R6 Class	0.0084
Domestic Equities	OUBH	American Funds American Mutual Fund® Class R-6	0.0027
Domestic Equities	2328	Fidelity® 500 Index Fund	0.00015
Domestic Equities	2945	Fidelity® Blue Chip Growth K6 Fund	0.0045
Domestic Equities	2352	Fidelity® Mid Cap Index Fund	0.00025
Domestic Equities	2957	Small Cap Growth K6	0.006
Domestic Equities	2358	Fidelity® Small Cap Index	0.00025
Domestic Equities	OVKH	MFS Mid Cap Growth Fund Class R6	0.007
Domestic Equities	OSR1	MFS Mid Cap Value Fund	0.0068
Domestic Equities	OIPN	T. Rowe Price Dividend Growth Fund I Class	0.005
International/Global	OK38	Columbia Emerging Markets Fund Institutional 3 Class	0.0111
International/Global	2348	Fidelity® Global ex U.S. Index Fund	0.00055
International/Global	2953	Fidelity® International Capital Appreciation K6 Fund	0.0065
Money Market (or Short Term)	3067	Fidelity® Government Money Market Fund - Class K6	0.0027
Specialty	OL1K	Cohen & Steers Realty Shares Fund Class Z	0.0087
Target Date	2989	Fidelity Freedom® 2005 Fund - Class K6	0.0037
Target Date	2990	Fidelity Freedom® 2010 Fund - Class K6	0.0038
Target Date	2991	Fidelity Freedom® 2015 Fund - Class K6	0.004
Target Date	2992	Fidelity Freedom® 2020 Fund - Class K6	0.0042
Target Date	2993	Fidelity Freedom® 2025 Fund - Class K6	0.0044
Target Date	2994	Fidelity Freedom® 2030 Fund - Class K6	0.0046
Target Date	2995	Fidelity Freedom® 2035 Fund - Class K6	0.0048
Target Date	2996	Fidelity Freedom® 2040 Fund - Class K6	0.005
Target Date	2997	Fidelity Freedom® 2045 Fund - Class K6	0.005
Target Date	2998	Fidelity Freedom® 2050 Fund - Class K6	0.005
Target Date	2999	Fidelity Freedom® 2055 Fund - Class K6	0.005
Target Date	3000	Fidelity Freedom® 2060 Fund - Class K6	0.005
Target Date	3417	Fidelity Freedom® 2065 Fund - Class K6	0.005
Target Date	3001	Fidelity Freedom® Income Fund - Class K6	0.0037
Right now, I am thinking of the following replacements:

FSKAX:
Fidelity® 500 Index Fund
or
80% (Fidelity® 500 Index Fund) and 20% (Fidelity® Small Cap Index)

FTIHX:
Fidelity® Global ex U.S. Index Fund

Let me know what you think. Also, any idea why there are so few low-cost index funds in this selection? The TD funds are pretty expensive compared with Vanguard's TD funds.

Thanks in advance!
I'm not sure if you typed the expense ratios wrong are looking at something else, but all of these funds are very, very cheap.

You can use the 500 and a combination of mid and small cap index funds to get the total market. There's an article in the wiki, but it's something like 80/15/5. What you've proposed is fine too.

They probably don't offer the total fund to make it easier for people to overweight mid/small.
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: Choosing funds for 401k plan

Post by telemark »

Your choices are what I would have suggested, very direct equivalents for what you have now. Funds in a 401K plan are chosen by the plan adminstrator, who may or may not know much and may or may not be getting good advice. At least you have some good choices. The plan I retired on did not :(
exodusNH wrote: Mon Nov 29, 2021 10:36 pm I'm not sure if you typed the expense ratios wrong are looking at something else, but all of these funds are very, very cheap.
I suspect those are written as fractions rather than as percentages, so there are two extra places after the decimal point.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Choosing funds for 401k plan

Post by tashnewbie »

OP: You appear to have written the expense ratios as decimals instead of precentages. They all look very, very low when stated as decimals!!

You should count yourself lucky to have great, low-cost options in a small employer 401k!! Most small employers' plans seem to have awful fund options and high administrative fees.

I would use the funds you selected and rest easy. You don't have to try to approximate the total US market with the 2 funds you listed (could use just the 500 index), but if you want to try to replicate, I think 80/20 ratio is good enough. See this wiki for specific figures: link
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Choosing funds for 401k plan

Post by ruralavalon »

bobblehead54 wrote: Mon Nov 29, 2021 8:41 pm Hi bogleheads,

My company is moving its 401k program to a new provider at the start of the new year. The funds that I currently use are not going to be available with the new provider, so I need your help to find replacements.

I work for a small company of around 100 employees. Under our current system, we have self-directed 401k accounts at the brokerage houses of our choosing (mine is with Fidelity). I have my money invested in the following two funds ( 60%/40% US/Intl ):
FSKAX (domestic) ER: 0.015%
FTIHX (international) ER: 0.06%

. . . . .

Right now, I am thinking of the following replacements:

FSKAX:
Fidelity® 500 Index Fund
or
80% (Fidelity® 500 Index Fund) and 20% (Fidelity® Small Cap Index)

FTIHX:
Fidelity® Global ex U.S. Index Fund

Let me know what you think. . . . .
Those are excellent fund choices as replacements.

In my opinion a S&P 500 index fund is good enough by itself for investing in U.S. stocks. A S&P 500 index fund covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Sometimes one type was a little bit ahead, sometimes the other. Portfolio Visualizer, 1993-2021. I used the oldest share classes to get the longest period for comparison. I would not bother adding the small-cap fund.

Fidelity® Global ex U.S. Index Fund (FSGGX) is a total international stock index fund omitting only small-cap (see "portfolio" tab, stock style "weight"). The performance of FSGGX has been very similar to a total international stock index fund. Portfolio Visualizer, 2012-2021. I used the Vanguard Total International Index Fund rather than the Fidelity Total International Index Fund for comparison, to get a longer period for comparison. The omission of small-cap has historically made little difference.

Move the decimal points two places to the right and you have the correct expense ratios expressed as percentages.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
bobblehead54
Posts: 8
Joined: Sun Mar 14, 2021 12:16 pm

Re: Choosing funds for 401k plan

Post by bobblehead54 »

Hi everyone,

Thank you for the feed back and thank you for taking the time to post such thoughtful responses.

It sounds like the Fidelity® 500 Index Fund and the Fidelity® Global ex U.S. Index Fund (FSGGX) are really good choices. I will count myself lucky that I have these choices in my plan based on the comments that people have made about small companies usually having poor 401k fund choices.

The expense ratios are expressed as actual decimal numbers (not percentages). Sorry for this confusion. I originally had the expense ratios expressed as percentages, but MS Excel kept rounding the smallest decimal numbers up, so I switched the columns from "percentage" to "number."

Thank you all for your help!
Post Reply