Just got my first 401K at work through Mass Mutual. I have 17 options to choose from. I don’t think we have index funds, and most funds have high expenses between 0.75-1.66%.

So I decided to care more about the fund’s performance and less about the fees. And these are the funds I ended up choosing: http://hellomoney.co/portfolio/a43bff-24yo-mass-mutual-401k

I’ve picked 2 stock funds. The portfolio I have in mind has a 73/23/4% allocation in stocks/bonds/other.

A short personal summary

  • My age: 24 Income: $48K/yr
  • Account type: 401k (Company offers full match up to 6%)
  • Debt: Credit card $3500 balance and pay $500 mo (9.98% APY)
  • Other savings or investments: $8K cash in Ally checking account
  • Portfolio goal: Retirement prep

Not sure if I am on the right track here, just want some crit from others. Any input is much appreciated.

  • 2
    One thing you should definitely do is ask your employer why there aren't any index funds in your 401(k) plan. The difference between funds with 0.75% and 0.1% expense ratios is huge, especially at your age.
    – D Krueger
    Commented Nov 6, 2015 at 14:13

3 Answers 3


If you're willing to do a little more work and bookkeeping than just putting money into the 401(k) I would recommend the following. I note that you said you chose some funds based on performance since the expense ratios are all high. I would recommend against chasing performance because active funds will almost always falter; honor the old saw: "past performance is no guarantee of future returns".

Assuming the cash in your Ally account is an emergency fund, I would use it to pay off your credit card debt to avoid the interest payments. Use free cash flow in the coming months to bring the emergency fund balance back up to an acceptable level. If the Ally account is not an emergency fund, I would make it one!

With no debt and an emergency fund for 3-12 months of living expenses (pick your risk tolerance), then you can concentrate on investing. Your 401(k) options are unfortunately pretty poor. With those choices I would invest this way:

  1. Invest as much as required to maximize the company match to your 401(k), but no more. For most people I would recommend to invest 100% in RRTFX because it is already fairly well diversified and keeps it simple. Personally I prefer a higher international allocation than the ~30% of RRTFX as well as a little more real estate exposure, so I would probably put the majority into RRTFX (say 75%) with the remainder in RERCX (15%) and OREAX (10%). I don't like that RERCX is active, but there does not appear to be an index option. The other funds that concentrate on slices of the US market I wouldn't bother with since RRTFX already covers them; you're just creating additional leverage. Small caps historically have done well, for instance, but not in all situations, and who knows what the future may hold.
  2. After you hit the 401(k) match, begin putting the rest of your monthly funds available for investment towards either an IRA or Roth IRA (be sure to be aware of the yearly contribution limits). Personally I prefer the immediate tax benefits of an IRA, but I'm going for early financial independence, so I expect my tax rate to be much lower when it comes time to withdraw from retirement accounts, thus negating most of the Roth benefit. A good article is available at Mad Fientist on choosing between the two. Note that it is an early financial independence site, so some of the points he makes are assuming that is the reader's goal as well. Whichever way you go, put your money into low cost index funds or ETFs.

Once you fill up your choice of IRA, then you have the tougher decision of where to put any extra money you have to invest (if any). A brokerage account gives you the freedom of investment choices and the ability to easily pull out money in the case of a dire emergency. The 401(k) will give you tax benefits, but high fund expenses. The tax benefits are considerable, so if I were at a job where I plan on moving on in a few years, I'd fund the 401(k) up to the max with the knowledge that I'd roll the 401(k) into a rollover IRA in the (relatively) short term. If I saw myself staying at the employer for a long time (5+ years), I'd probably take the taxable account route since those high fund fees will add up over time.

One you start building up a solid base, then I might look into having a small allocation in one of my accounts for "play money" to pick individual stocks, or start making sector bets.

  • 2
    Well answered. Generally the most important things for the long term are in order: avoiding cc debt, avoiding taxes, diversifying investments, avoiding fees and finally worrying about which actual mutual fund to get. This answer captures all of the above.
    – rhaskett
    Commented Jan 4, 2016 at 21:50

If it was me, I would withdraw money from savings and be debt free today. I would then pour the $500 into building back your savings. Then of course, never again carry a balance on your CC.

At your age MSFRX is a losing game. You can handle the volatility of better performing funds, I would have zero in there.

If it was me, I would do something totally different then you are doing:

  • 25% OSGIX
  • 25% ANOAX
  • 15% RERCX
  • 25% OREAX
  • 10% RRTFX

Keep in mind you are doing very good as is. The best way to win with money is to make good moves overtime, and given your debt level, savings, and willingness to contribute to a 401K your moves are pretty darn good.

Keep in mind you will probably want to start saving a down payment for a house. This should be done outside of your 401K.

Overall good work!

  • 2
    Hi Pete. I appreciate your input and I agree with you about savings and CC debt. If I follow your suggestion, then I will end up with something like this: hellomoney.co/portfolio/1ada45-suggestion Can you explain me more why you choose these funds? It'd be appreciative.
    – user34678
    Commented Nov 5, 2015 at 14:36
  • Mutual funds provide directed diversification, different types of fund provide additional diversification. You want to maximize returns but also limit it by being spread across sectors of the market.
    – Pete B.
    Commented Nov 5, 2015 at 17:44

Yours two funds are redundant. Both are designed to have a mix of bonds and stocks and allow you to put all your money in them. Pick the one that has the lowest fees and stick with that (I didn't look at the funds you didn't select...they didn't look great either). Although all your funds have high fees, some are higher than others, so don't ignore fees.

When you have decided on your portfolio weights, prioritize your money thus:

  1. Contribute enough to your 401(k) to get the full match from your employer

  2. Put everything else toward paying off that credit card until you have 0 balance. It's ok to use the card, but let it be little enough that you pay your statement balance off each month so you pay no interest.

  3. Then set aside some savings and invest any retirement money into a Roth IRA. At your income level your taxes are low so Roth is better than traditional IRA or 401(k).

  4. If you max out your Roth, put any other retirement savings in your 401(k).

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