Hi, I am currently employed by Boeing and investing 8& of pre-taxed money into their VIP savings plan. I am 20 years old and want to invest my money aggressively. Boeing matches 100% of the first 4%, and 50% of the last 4%. However they do increase employer contributions above the 8% depending on how much of your plan is invested in company stock.Currently my allocations are as follows:International Index fund : 20%Science and Technology fund: 20%Boeing Stock fund: 60%I know that its overly aggressive but I have only been with the company for a couple of months and was planning on changing things up. I would really appreciate your suggestions. Also I would like to keep a decent percentage in company stock. Thanks, Chris(Below is the list of available funds)LIFECYCLE FUNDS Lifecycle Retirement Fund Lifecycle 2020 Fund Lifecycle 2030 Fund Lifecycle 2040 Fund Lifecycle 2050 Fund INDEXED FUNDS Bond Market Index Fund Balanced Index Fund S&P 500 Index Fund International Index Fund Russell 2000 Index Fund ACTIVELY MANAGED FUNDS VIP Stable Value Fund Global Bond Fund Diversified Real Asset Fund U.S. Large Companies Fund Global Equity Fund International Companies Fund U.S. Small/Mid Companies Fund Science and Technology Fund COMPANY STOCK Boeing Stock Fund
I think you are doing fine. You should be 100% in equities at your age, and the ones you have chosen are reasonable.You know Boeing's prospects better than I do. They are an industry leader and a major exporter. That is a great combination. And for now when you are just beginning, its OK to build a solid position in Boeing stock--especially with the extra incentives they give you.In time (and especially as you get closer to retirement) you will want to trim your company stock holdings to something more reasonable. Once you get to say two years gross pay in your VIP plan, I'd say keep your Boeing stock down to about 30% of your holdings.It looks like the funds you are offered are custom for your plan, and not public mutual funds you could check out on Morningstar.com. None the less the company should give you performance information for the funds over say the last 10 years. You could compare those numbers to those of 4 or 5 star funds in Morningstar to see that they are performing well compared to the average fund in the category (indicating a well managed fund). Avoid the under achievers.Your S&P 500 Index fund is a safe bet for your equity investments other than Boeing stock. But if other equity funds in your plan offer better performance, by all means try them.The main thing is keep an eye on your funds to make sure they perform as they should. As long as they perform keep them. If they under perform, find something better.In time you can add more funds as your account grows, but try to own the best performing funds. You are offered several international funds. Which one performs best? Small cap, Russell 2000, Science and Technology have interesting names and might perform well from time to time, but check out their numbers before you decide.
Back in the 2005 period (and many years before) the idea of investing in banks looked rather safe and secure -- particularly if the bank was your employer and they matched funds. With hindsight there was a problem. Most bank stocks today are worth less than 50% of their 2007 values.Think about Boeing. It is a defense contractor -- what will happen to defense spending if the decision is made to cut the DOD budget by 15%? I would bet people will not be cut that much, so equipment will get cut more.And back to banks -- a lot of people have lost their jobs in banking. A major bank in Atlanta has cut its work force by over 13% from 2006 levels. Consider your position - how secure would it been if something unexpected happened to Boeing, its business or maybe the Dreamliner were to start falling out of the sky in say 2014.While company matches are great, putting too many eggs in one basket can be bad.GordonAtlanta
I'd unweight the Boeing stock a little bit. The reason is that if something bad happens to the company then both your job and your retirement are at risk.
Just to reiterate what others have said, I'd lighten up on the Boeing stock. If the company tanks, you lose your employment AND retirement.Out of your options I'd do something like this:35% S&P 500 index35% international index15% bond market index15% global bond fundMany would say you don't need bonds at your age and they can make a valid argument. However, bonds TEND to be less volatile, AND they can pay out hefty dividends that when reinvested add up to a nice return over the compounded years.One more thing. You might want to talk to your HR director or who ever handles the choice of funds and see if you can't get any REIT funds added.JLC
Thanks for all the input I'm definitely going to decrease my percentage in Boeing stock..If anyone has any other ideas as to how I should distribute my plan through the different funds please share your ideas.Thanks Chris
Chris, the best advice is keep doing what you are doing.When you get a statement from your plan, look over how your funds are performing compared to the other funds offered. Gradually shift to the best performing funds.Do that review at least once per year, ideally once per quarter.Out of this time spent, your own experience will be better than our advice.On bonds and on Boeing stock, do consider how devastated you would be if the market crashed or Boeing went out of business. As a young person, this is much less of a fear than it is for people closer to retirement. They have less time to recover. But it also matters if you have responsibilities like family and children and if your spouse has a good job. Etc.One size does not fit all. Think about it and decide what makes sense for you.
First, I'd recommend using index funds over actively managed ones. Costs matter a lot - the average mutual fund underperforms by the percentage of costs.Second, choose an allocation to small caps, large caps and international stocks. If you are aggressive, you can weight small and international higher. I used something like 40 large, 30 small, 30 intl.Third, don't shift into the "best performing" sectors - recent high performance is one of the worst indicators of future performance. I'd recommend that you rebalance your allocation between the three sectors and company stock on an annual or semi-annual basis, if something gets more than about 5% out of whack.Over time, different market sectors tend to outperform: small caps for a while, then large, then international, etc. Rebalancing helps you to invest in things when they are down and sell them when they are up - buy low, sell high.
Unless I missed it I don’t think that you mentioned exactly how much extra they give you for investing in the company stock. For example if they give you a 33% incentive then you might get an extra $250 for $750 invested in the stock, so you would be OK if the stock declined 25% and that $1,000 in stock declined to $750. Of course investing in it is a bit of a gamble but it if the odds are right then it could be a gamble worth taking. In addition to the risk of having too much in the company stock, there are additional risks that would need to be researched;1) How is it vested? If you leave before five or seven years do you lose part of the company match? If it does not vest quickly you could end up in a triple whammy if the company runs into trouble in a few years. A) you lose your job in a layoff, B) the stock is low, and C) you lose the unvested stock when you are laid off. 2) How is it taxed? Company stock in a retirement plan is often the exception to the rule on retirement planning. This gets complex, do not assume anything until you have researched how this works. 3) What are the rules for selling the stock with in the retirement plan? For example if you change your mind in three years can you move sell off the company stock and move the money into mutual funds? Greg
Waaaaaaaaaaaay too much in Boeing stock. That's a whole lotta eggs in one basket, not well diversified at all.
OK, dear youngling, let me put it this way.People who invested in their company stock, who worked for STRONG companies that could NEVER go bankrupt, BILLION dollar companies - and lost it all:Enron employees Kodak employeesWorldcom employeesGM Employees (it got bailed out, sure, but stock went from $80 to $4)various banking employeesFolks who put everything with "genius" Bernie Madoff....Do not have the assumption that Boeing could never fail, that ANY company could never fail. Even if Boeing continues to exist, it's stock COULD drop 90% - and if 60% of your retirement is there....bad news. Half your retirement. Listen to someone who's watched the market for 20 years, to EVERY financial advisor worth their salt.STAY DIVERSIFIED.Companies die. Markets recover.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Ra