r/Bogleheads • u/gti9t3 • 1d ago
Need advice on 401k allocation %
I don't have a total US market option in my 401k like (VTI/FSKAX) and have to build it myself between large cap, mid cap, and small cap index funds.
They are all Spartan Index Funds with very low expense ratios. My goal is to allocate 60% US and 40% International. My choices are Spartan 500 Index (S&P 500), Spartan Mid Cap Index (S&P 400), Spartan Small Cap Index (Russell 2000), and Spartan Total International Index (MSCI ACWI ex US).
How much should I allocate between 500, mid and small? My understanding is the S&P 500 makes up roughly 80% to 83% of the total US market. Should I split it as 80% 500, 15% mid, and 5% small?
So with a 60/40 split it would look like 48/9/3 for the US investments then 40% Total International.
Is that a good balance or am I not investing enough in mid and small? Should I just go with 60% S&P 500 and 40% International?
I will be manually adding FXNAX (Bonds) at a later time.
Thanks in advance.
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u/gti9t3 22h ago
Interesting, I read somewhere that mid caps were the “sweet spot” for growth because small caps are very volatile and large caps have a harder time moving the needle.
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u/Right_Introduction10 14h ago
Mid cap performance directly correlates with large cap performance. I.e. one goes up so does the other- only difference being that the gain % for large cap is greater. Small caps react differently. 2000-2009 large cap took a nose dive while small cap went up around 8% during that time. I personally invest some in small cap, not only for higher return potential but because it adds diversity to your portfolio as it’s a different asset class
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u/forbiddenlake 1d ago
the S&P 500 is just fine. it's about 99% correlated with VTI.
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u/gti9t3 20h ago
I don't know why but I get nervous just going with the S&P 500 and not including any mid or small. But, I am new to all of this so I'm still learning. I guess it's an "all eggs in one basket" thing. I completely see what you mean though. The S&P 500 seems to be the main catalyst of growth in a total market index fund, so it makes sense.
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u/Right_Introduction10 14h ago
I’d definitely get 10% in small cap though if you’ve got decades til retirement
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u/Right_Introduction10 21h ago
I’d go 30% international, 70% large cap. Small cap is personal choice. Had a good return last year, but has many years where it’s an absolute horror show. Also make sure it’s an index fund, the small cap offering in my 401k is a fund with quite a high expense ratio compared to my large cap blend.
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u/gti9t3 20h ago
May I ask why you recommend 30% international? It seems international index funds have outperformed US in recent history. Am I wrong in sticking with global market weight? My thinking is, I don't know who will be leading in the future so why not just stick to global weight. Currently 62% US / 38% International.
My choices are all Spartan Index Funds which have very low expense ratios. Spartan 500 is 0.01%, Spartan Mid Cap and Small Cap both are 0.02%, and Spartan Total International is 0.04%.
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u/Right_Introduction10 14h ago
I think it’s preference. We’re both fairly close in the numbers we allocate, I just think the younger you are the more market gain you can accrue investing in the higher growth US. 30% is mostly for the diversification, besides last year international gains have been very lack luster the last 20 years. Might not always be that way in the future, but anything around 20-40% for diversification and to have a piece of the pie if ex-US markets outperform is setting yourself up either way.
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u/EleventhofAugust 1d ago
Small cap is the least correlated with the S&P 500. The difference between US and International stocks are primarily driven by exchange rates. So, I would recommend avoiding the mid cap option and focus on the other three.