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Advice desperately needed concerning my 401k

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Money Talk > Retirement Planning

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dedmunne
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Advice desperately needed concerning my 401k  Reply with quote  

I'm 49 years old and only have 51k in my 401k due to not being in a position to save for retirement until the last 8 years. I made my investment elections by looking at historical fund performances and basically left them alone.

I assumed y'all would want to see my choices and elections so I'll post them.

Interest Income Fund
Benchmark - Three Month Treasury Index - B of A 3-Month T Bill



Investment Grade Bond Index Fund
Benchmark - Barclays Capital Aggregate Bond Index



S&P 500 Index Fund
Benchmark - S&P 500 Index



International Equity Index Fund
Benchmark - MSCI EAFE Index



Inflation Protected Treasury Index Fund
Benchmark - Barclays Capital Inflation-Linked U.S. Treasury Index



Long-Term Government Bond Index Fund
Benchmark - Barclays Capital Long Term Government Bond Index



High Yield Corporate Bond Fund
Benchmark - Bank of America Merrill Lynch High Yield Master II Index



Large Company Value Index Fund
Benchmark - Russell 1000 Value Index



Large Company Growth Index Fund
Benchmark - Russell 1000 Growth Index



Small Company Value Index Fund
Benchmark - Russell 2000 Value Index



Small Company Growth Index Fund
Benchmark - Russell 2000 Growth Index


Emerging Market Stock Index Fund
Benchmark - MSCI Emerging Market Index


Real Estate Investment Trust Index Fund
Benchmark - FTSE/EPRA Real Estate Global Index


Commodities Index Fund
Benchmark - Dow Jones-UBS Commodity Index



My current elections are


* Closing Value -- % of Total

S&P 500 Index Fund *$6,257.39 -- 12.16%

Large Company Value Index Fund *$8,943.16 -- 17.38%

Large Company Growth Index Fund *$7,662.96 -- 14.89%

Small Company Value Index Fund *$13,374.67 -- 25.99%

Small Company Growth Index Fund *$15,220.84 -- 29.58%





I thought that this was being 'diversified' but Given the S&P's broad range of Companies wouldn't that be diversified enough and should I just put all of my money in that since it averages over the 11% mark I see referenced for a return goal? This latest correction has me losing $600.00 per day and sometimes gaining as much but it just seems I could be in a much safer situation than I currently am. Any and all advice would be greatly appreciated.
Post Thu Oct 23, 2014 2:05 pm
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littleroc02us
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Short answer is Yes. My head was spinning when I looked at how many funds you have. IMO, it's much to conservative. As Old Guy would tell you risk=rewards. The S&P500 is an exceptional investment for all earning on average 11%. You have too many treasury's and bonds in your portfolio, I'd look at a more aggressive allocation. I'm 43 and my portfolio consists of the Vanguard Total Stock Market Admiral index fund, an international fund and very little in bonds. You still have around 20 years to invest, so now is the time to rides the waves of the market.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Thu Oct 23, 2014 2:28 pm
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blixet
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It looks like the long list is comprised of the options available and the short list at the bottom is the current allocation.

No fixed income, over half in small cap equities, no international, an S&P 500 index fund and then large growth and large value indexes (which basically combine to give something just like the S&P 500 fund).

What is your rationale for this portfolio?

Information is more valuable sold than used – Fischer Black
Post Thu Oct 23, 2014 2:49 pm
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Publius
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Using the S&P500 index would be simpler, as the other funds likely contain redundancies to that fund, but it won't necessarily be any safer. Having 100% of your portfolio in the S&P guarantees that you will feel the corrections of the market exactly as you see on the market moving from day to day. A little broader diversification might level out some of the ups and downs. You could add some international stock funds for some diversification among equities, or you could add bonds for diversification across classes.
Post Thu Oct 23, 2014 4:47 pm
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dedmunne
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Thank's for the replies. Yes the long list is all available elections and the short list is my elections. My reasoning for those choices is because when I looked at the 5 year fund performances of all the choices, they had the highest rate of return. I know that might not be the best method but it was better than flipping a coin. Since 2012 those choices have increased my account by over 40% according to the "my fund performance" graphs, which I'm pleasantly surprised and grateful for.

When looking at the 'Small Company' elections investments last week I realized I had never heard of any of them and the fact that they are both down about 5% for the year, even though they've returned very good gains for me in the past, scared me. I divided their holdings up last night and distributed them to the S&P, and the 'Large Company' elections, because they are all up about 5.50% for the year, in hopes of stopping the bleeding for now.

Should I include the International Equity Index Fund, Investment Grade Bond Index Fund, Long-Term Government Bond Index Fund, High Yield Corporate Bond Fund, Emerging Market Stock Index Fund and the Real Estate Investment Trust Index Fund? And if so which ones and what ratio?

Again, I can't thank you enough for all of your advice as it very kind of you all. I'm not expecting guaranteed results by any means but what would be a good ratio between my choices?
Post Thu Oct 23, 2014 10:27 pm
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blixet
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I can't give you specific advice but here are a few tidbits of wisdom to consider:

Death-wish investment strategies:

Buy from the top of the short-term performance chart.

'Diversify' with a lot of funds that hold the same kind of securities.

Aggressively practice market timing.

Lose faith in what you are doing.

Overemphasize sector funds and specialized portfolios.

Buy and forget about it.

The basic principles for successful mutual fund investing:

1. Have a plan. Put your plan in writing and keep it handy.

2. Start investing as soon as possible. Give your plan time to perform and you'll get the benefit of compounded returns.

3. Diversify your investments. Diversify asset classes (stocks, bonds, cash) and diversify geographically by having some of your money invested internationally.

4. Invest regularly. Investing is a process, not a onetime event. "Pay yourself first" from your income, you'll maximize your chance for success.

5. Maintain a long-term perspective. Focus on long-term results, not what's immediately in front of you.

6. Keep some of your money in equities. Almost any portfolio can benefit from at least a small investment in equities for growth. Over the long-term, stocks and the mutual funds that invest in them outperform bonds and cash and keep investors ahead of inflation.

7. Keep some of your money in cash. It's certainly wise to have enough cash on hand, or funds with low volatility, to cover emergencies, contingencies and opportunities.

8. Know what you are buying. Don't part with your money until you understand the potential risks that go along with the potential rewards from any investment. Don't invest in things that are too complex for your own comfort level.

9. Understand your plan so that somebody with designs on your money or your business can't unreasonably talk you out of it.

10. Once you have a plan follow it. It's a funny thing about plans: They don't work unless you follow them. Even a "perfect" investment strategy does you no good if you can't or won't put it into practice. Even a reasonable, but imperfect plan, if you use it, is better than none at all.

Information is more valuable sold than used – Fischer Black
Post Thu Oct 23, 2014 11:25 pm
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dedmunne
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Thank you for your advice.
Post Wed Oct 29, 2014 2:02 am
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