AMAZON 401(K) PLAN Investment Options

How to Construct a Balanced, Diversified Asset Allocation Portfolio in Your Amazon 401(k) Plan

Participating in the Amazon 401(k) Plan is a great step towards securing your financial future. One of the key aspects of maximizing your retirement savings is constructing a balanced, diversified asset allocation portfolio. This article will guide you through the four-step RAID approach to help you achieve this goal.

Investment Options Available in the Amazon 401(k) Plan

Before diving into the RAID approach, let's list the available investment options:

• PIMCO TOTAL RTN II COLLECTIVE TRUST FUND
• VANGUARD TARGET INC COLLECTIVE TRUST FUND
• VANGUARD TARGET 2020 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2025 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2030 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2035 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2040 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2045 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2050 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2055 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2060 COLLECTIVE TRUST FUND
• VANGUARD TARGET 2065 COLLECTIVE TRUST FUND
• HARRIS OAKMRK INTL 3 COLLECTIVE TRUST FUND
• VANG RET SVNG TR II COLLECTIVE TRUST FUND
• VANGUARD TARGET 2070 COLLECTIVE TRUST FUND
• VANG SM VAL IDX INST MUTUAL FUND
• VANG FTSE SOC IDX IS MUTUAL FUND
• VG IS TL INTL STK MK COLLECTIVE TRUST FUND
• VG IS TOT BD MKT IDX COLLECTIVE TRUST FUND
• VANG INST 500 IDX TR COLLECTIVE TRUST FUND
• VANG EXPLORER ADM MUTUAL FUND
• VANG VMMR-FED MMKT MONEY MARKET MF
• AF EUROPAC GROWTH R6 MUTUAL FUND
• AMAZON.COM STOCK

The major asset classes covered by these investment options include:

• US Stocks
• International Stocks
• Bonds

Step 1: Risk Assessment

The first step in constructing your portfolio is to assess your risk tolerance. This involves examining factors such as your age, job stability, growth expectations, and overall risk tolerance. Younger investors with a longer time horizon can typically afford to take on more risk, while those closer to retirement may prefer a more conservative approach.

To help decide how much of your portfolio should be allocated to stocks versus bonds, you can refer to the guidelines provided by MyPlanIQ.

Step 2: Asset Allocation

Once you have assessed your risk tolerance, the next step is to decide how much to allocate to each major asset class. A balanced portfolio typically includes a mix of US stocks, international stocks, emerging market stocks, REITs, and bonds.

You can utilize the allocation templates discussed in MyPlanIQ's Asset Allocation Portfolio Templates to guide your decisions.

Step 3: Investment Selections

After determining your asset allocation, the next step is to select specific funds for each asset class. It's important to emphasize low-cost index funds whenever possible, as they tend to have lower fees and can provide broad market exposure.

Here is an example of how to construct a moderate asset allocation portfolio using the available investment options:

• 42% US Stocks: VANG INST 500 IDX TR COLLECTIVE TRUST FUND (Index Fund)
• 18% International Stocks: VG IS TL INTL STK MK COLLECTIVE TRUST FUND (Index Fund)
• 40% Bonds: VG IS TOT BD MKT IDX COLLECTIVE TRUST FUND (Index Fund)

We note that the plan's investment options include an excellent active bond fund, the PIMCO Total Return II Collective Trust Fund, which could be used in conjunction with the Vanguard Total Bond Market Index Collective Trust Fund to provide bond exposure. Furthermore, the plan also offers a strong international stock fund, the American Funds EuroPacific Growth R6 Mutual Fund from Capital Group. This fund serves as a good substitute for, or complement to, the VG IS TL INTL STK MK COLLECTIVE TRUST FUND in the international stock asset class.

Step 4: Disciplined Rebalancing

The final step is to regularly monitor and rebalance your portfolio. Over time, the value of your investments will change, which can cause your asset allocation to drift from your original plan. Rebalancing involves adjusting your portfolio back to your target allocation, which can help manage risk and ensure that your investments remain aligned with your goals.

Target Date Funds as an Easy Alternative

If you prefer a simpler approach, you can consider investing in target date funds. These funds automatically adjust their asset allocation based on your expected retirement date. For example, if you plan to retire around 2040, you could choose the VANGUARD TARGET 2040 COLLECTIVE TRUST FUND. This fund will gradually become more conservative as you approach retirement.

Conclusion

Constructing a balanced, diversified asset allocation portfolio in your Amazon 401(k) Plan is a crucial step towards achieving your retirement goals. By following the RAID approach---Risk Assessment, Asset Allocation, Investment Selections, and Disciplined Rebalancing---you can create a portfolio that aligns with your risk tolerance and investment objectives. Remember to utilize low-cost index funds whenever possible and consider target date funds for a simpler investment strategy.

Basic asset allocation templates

The following asset allocation templates are based on popular lazy portfolios. These are core or major asset class-based portfolios using ultra-low-cost index funds for each asset class. Once you have decided on your proper risk asset (stocks) allocation, you can utilize these lazy portfolio templates to scale the allocations to your risk allocation level. See Asset Allocation Portfolio Templates for a guide:

The return data shown below all have the same latest date: 04/25/2025.

• Brief Performance
• Chart

Name	YTD Return	1Yr AR	3Yr AR	5Yr AR	10Yr AR	15Yr AR	20Yr AR	Inception
Four Core Asset Portfolio	-0.88%	7.97%	4.70%	7.46%	5.90%	6.80%	6.66%	6.35%
Five Core Asset Portfolio	-1.15%	7.89%	4.57%	7.32%	5.82%	6.70%	6.74%	6.54%
Three Core Asset Portfolio	-1.15%	7.88%	5.54%	7.93%	6.29%	7.06%	6.78%	6.27%
Two Core Asset Portfolio	-3.37%	7.96%	5.98%	8.41%	7.36%	8.30%	7.47%	6.76%
Yale Endowment Template	-0.55%	8.88%	3.48%	7.21%	6.21%	7.66%	7.45%	7.61%
S&P 500 Index	-5.72%	10.78%	10.28%	15.64%	11.99%	12.63%	10.12%	8.21%

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