This fund is the lowest ER in my 401k, even lower than the 500 index fund available in it (0.73%).  What are your thoughts and impressions of this fund from people that own it.  I pay no load so that is not an issue.  I have read that it will start to underperform due to asset bloat but it seems to be doing well.  I am looking for one good fund and this is the best on available other than a good small cap fund (keeley small cap value).  I want to stick to one fund to minimize fees and growth fund seems diversified enough.  Any thoughts are appreciated.  I have no other investments, am 31 years old, married/1 child.  Thanks.

 

Dave 

If you don't already have a global fund, I would add some global diversity by putting some money in EuroPacific Growth Fund, too.

I do not have access to that fund in my 401k.  The international fund is higher ER and I want ONE fund to minimize cost and maximize returns. 

Do you have to invest before April 15th?  Growth Fund of America should be coming out with a semi-annual report in April of this year and it could be helpful in deciding what to do.

This fund is not one of my favorites, but others love it.

I can invest whenever I want to, the funds are in the small value fund at the moment but I have reservations about my whole retirement in small value.  I will wait for the report.  Thanks for your opinion.

 

Dave

I like (and totally understand) the idea of concentrating in ONE or two funds.

Is there a 'worldwide option' available to you?

t

There is AIM global Equity which is about 47% US with around 1.5 ER.  Also Thornberg International Value which I think may be something like 30% US which has 1.6 ER but really good returns as of late.  The other choices are so so, Federated Kaufman, Columbia Acorn, etc.  Do you think I should go with the global or international fund instead?

Consider a combo of Thornburg International Value and Growth Fund of America, 50/50

t

I would go with Taylors advice.  You need some global....I do not think the global  economy is ever going away, some exposure over the long hall should server you wll.  Growth Fund of America has 18% Foreign currently.  So you might break your percentages with that in mind.....or not.  I am sure you will be fine.

B.

[quote user="TaylorZR"]

Consider a combo of Thornburg International Value and Growth Fund of America, 50/50

[/quote]

A 50:50 mix of AGTHX:TGVAX would be too high of a percentage of foreign stocks for my tastes. 

If you go with a 75:25 mix of AGTHX:TGVAX, that would put you at about 50% US stocks, 35% foreign stocks, 10% cash and 5% bonds.  At 31 yo, a 75:25 mix of AGTHX:TGVAX is too biased towards large cap stocks for my tastes and a bit light on the bonds, too, for my tastes.  YMMV.

Well, I have no need for bonds, and actually per the fund info they only own cash/cash equivalents-no bonds at this time.  I would rather have a 50/50 mix or one fund.  I am not worried about percentages, just total return.  Perhaps a 50/50 mix of 500 index and international value would be better?  However, the growth fund has a lower ER than the index fund and higher returns so I do not want to go in that directions.  Besides the growth fund will change over time in respect to international exposure.  Also, some people feel its good to overweight international to take advantage of the weak dollar.  Something to think about.  For now I would prefer a simple 50/50 split and I will go from there.  Otherwise I will just use growth fund and leave it at that. 

I disagree.

40 US/ 60 International for a 31 YO is much more rational today......

----------------------------- 

As far as bonds, both funds hold some cash, and for a 31 YO, cash and stocks make much more sense today then owning any bonds

-----------------------------

Large Caps:

Large Cap Value and Growth (at a reasonable price) is the key for long term success.

Smallcaps shouldn't represent any more than about 5% of anyone's portfolio.

t

[quote user="daverx"]

Well, I have no need for bonds, and actually per the fund info they only own cash/cash equivalents-no bonds at this time. 

[/quote]

I see where AGTHX says that on the high level summary, but if you read the annual report, they say they own bonds and short term securities as of August 2007.  Whether or not you call a short term note issued by Fannie Mae a bond I suppose is a matter of opinion.  I call it a bond - a short term bond or an ultra-short term bond depending on its duration.  Morningstar says the fund holds bonds.  I suspect that Morningstar classifies the short term notes as bonds and that is why they say that AGTHX holds bonds.

It looks like most of the short term securities listed in their annual report have matured, though.  They are due to put out a semi-annual report in April.  I would call American Funds if you want more info on this point.  They have always been extremely helpful to me when I have called.

If you have no need for bonds, then you have no need for bonds.  Enuf said.  I like 'em but don't think now is a good time to start investing in intermediate or long term bonds as I think the Fed will raise interest rates in 2009 to combat inflation.

 

[quote user="daverx"]

I would rather have a 50/50 mix or one fund.  I am not worried about percentages, just total return.  Perhaps a 50/50 mix of 500 index and international value would be better?  However, the growth fund has a lower ER than the index fund and higher returns so I do not want to go in that directions.  Besides the growth fund will change over time in respect to international exposure.  Also, some people feel its good to overweight international to take advantage of the weak dollar.  Something to think about.  For now I would prefer a simple 50/50 split and I will go from there.  Otherwise I will just use growth fund and leave it at that. 
[/quote]

AGTHX has a limit to its international exposure of 15% outside the US and Canada.  I view it as a domestic large-cap growth fund.

Many funds hedge currency so I am not sure how much you profit from the weak dollar in these funds.  I would read the prospectuses and the annual reports and/or call the funds to find out how/if they hedge currency. 

At your age, I would go with the 50:50 split before I would go with 100% in AGTHX.  The 50:50 split is too heavily weighted to foreign stocks for my tastes as I said, but given the choice of the 50:50 split and 100% in AGTHX, I would go with the 50:50 split. 

[quote user="TaylorZR"]

I disagree.

40 US/ 60 International for a 31 YO is much more rational today......

[/quote]

I think the mix that makes sense for an investor of a certain age depends not just on the global allocation in the sense of the US:International mix but also the large cap:mid cap mix and with regard to the International allocation, in the Europe/Japan/Canada:emerging markets mix.  Since these funds are primarily large cap and the International stocks are more in the Europe/Japan/Canada arena than in the emerging markets, a 40:60 US:International mix is fine for a 31 yo IMO.

At 31 yo, I would go with a 50:50 US:International or at least 50:50 US/Canada:non-US/Canada and increase my mid-cap and emerging market exposure relative to what AGTHX and TGVAX offer, though, but I have my biases and don't pretend to think my way is the best way.  It is just the best way for me.  The only thing I know about the OP is that he is 31 yo with 1 child so all I can do is tell him what I would do. 

If the only 2 choices I have are a 50:50 mix of AGTHX:TGVAX and 100% in AGTHX, at 31 yo, I would go with the former over the latter.

I have two problems with the thornberg fund.  1.  its the R3 class, so high ER of 1.61.  2.  The top holdings are similar to growth fund, ie Roche, Nokia, and one or two others.  Thornburg is much more concentrated than growth which I like and holds a good cash position.  Given the high er and non A class share, is it still worth investing in?

Also, why not just growth fund?  It is diversified and owns a decent amount of international.  I have never really believed in international investing.  Warren Buffett advised people to put all their money in just the 500 index.  Cramer, in his new book advises you put it in an index fund or the lowest ER fund in your plan, which for me would be Growth.  I flip flop back and forth on all this, I would really like to make a decision and stick to it.  Thanks for all your help.

 

Dave 

"Warren Buffett advised people to put all their money in just the 500 index."

He means that only for those who don't invest their money with him.:-) 

t

 

 

 

 

 

[quote user="daverx"]

Also, why not just growth fund?  It is diversified and owns a decent amount of international.  I have never really believed in international investing. 

[/quote]

If you don't believe in International investing, then AGTHX is a good choice. You can always put future contributions into an international fund later if you change your mind.

I think there are a lot of great companies in Europe, Japan and Canada and I want to invest in them.  I think there are likely to be some great companies in emerging markets like Brazil in the future.  I am not so keen on Russia and China, though.  Others are.

 

[quote user="daverx"]

Warren Buffett advised people to put all their money in just the 500 index. 

[/quote]

Did Warren Buffet put all of his money in just the 500 index?

 

[quote user="daverx"]

Cramer, in his new book advises you put it in an index fund or the lowest ER fund in your plan, which for me would be Growth.  I flip flop back and forth on all this, I would really like to make a decision and stick to it.  Thanks for all your help.

[/quote]

There is a wealth of info on the Vanguard forum about index funds and sometimes they even let those who have other ideas speak without attacking them.  Other times, they don't.  But still a good place to read up.

I think AGTHX is considered a good domestic large cap fund and if it is the lowest ER fund in your plan and you don't believe in international investing or bonds and don't care about mid-cap exposure, it is a good choice for you.

[quote user="daverx"]I have two problems with the thornberg fund.  1.  its the R3 class, so high ER of 1.61.  2.  The top holdings are similar to growth fund, ie Roche, Nokia, and one or two others.  Thornburg is much more concentrated than growth which I like and holds a good cash position.  Given the high er and non A class share, is it still worth investing in?
[/quote]

None of us have a crystal ball, but I think at your age, you are better off having a larger international exposure than AGTHX alone can give you.  I won't change my position on that.  Taylor likes even more of an international exposure for someone your age than I do.

The higher ER is an issue, no doubt, but take a look at the 5 year performance data - 15% annualized returns for AGTHX vs. 25% for TGVAX.  The larger growth of TGVAX would have more than made up for the higher ER if you had invested 5 years ago.  Of course, past performance is no guarantee of future performance and we may be headed into a sustained global recession and if so, neither of these funds will yield that level of growth and could very well lose the gains they have made over the last 5 years.

[quote user="daverx"]

Also, why not just growth fund? 

[/quote]

The following link should help with that question

http://www.ski.org/Admin/RSPoole_grp/EBGrinnell/PDFs/2006%20Callan_Returns.pdf

Are you eligible for a ROTH to help balance out your allocation with the limited choices available to you in 401k?  Then perhaps you could satisfy your desire for lowest ER in 401k and not have all your nest egg in one large cap domestic growth fund, by using ROTH for small/mid cap, international, bonds etc.

Good Luck

I have no other investments, as I have no money to invest anywhere else.  I am only investing in 401k due to employer match.  I am going to go with 50/50 split between growth and international value. 

[quote user="daverx"]I have no other investments, as I have no money to invest anywhere else.  I am only investing in 401k due to employer match.  [/quote]

Make sure you max out the employer matching.  If you don't that is like throwing money away.

I am getting the full match.  I contribute 6% and they match 3% (50%). 

The number of funds has absolutely no bearing on the expenses you will pay.