verve247

I need help on deciding what percentages i should set for investing within my 401k. Can anyone give me a link or their own adivce on a good distribution model? I'm in my mid twenties and looking for moderate-aggressive investments.

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LegendKiller

Personally, I have the following.


Value stocks = 30%
Growth Stocks = 20%
International = 25%
Commodities = 10%
Large caps = 15%

Edit: In Response to VTGreg's post and something I should have added to mine. I am 27, my wife is 26. We both contribute the max matched into the funds and I allocate the funds. Here are the reasons why my allocation is above.

1. Value stocks usually outperform "growth" stocks
2. Growth stocks add in a ncie mix of aggressiveness
3. International and emerging markets add in a large amount of diversification and are also a huge source of growth
4. commodities add in further diversification
5. large caps are good for stability and diversification


Note, I have no bonds. Bond's returns, while safe, are low. They are used for principal protection and known return. For somebody who is older and can't ride out the ups and downs of the market, they are good investments. However, since we are 30+ years from retirement, we have a long time to ride out short-term performance issues.

Buy and hold.

VTGreg

Since you are in your 20's most would suggest that you invest most, if not all, of your contributions into stocks or stock funds.

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smeakim

I and my wife are around the same ages. We are having a little one here shortly so we are only putting in what the company matches becuase we need to save so the wife can stay home the full 12 weeks. I was told if you have less than 20K by numerous financial planners to not diversify much if at all. Once you have over 20K start to diversity. Most of my money is in agressive if not very aggressive funds. I do have whats not aggressive in a balanced fund which has been pretty good over the fews years since being out of college.

MikeD

Allocate as much as you can, and at least the percentage that your firm will match.

Good advice on the disto's above, but if you truly can't decide you can always do 100% S&P 500. After all, it's what all the other funds are measured against...and it's held its own over time.

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verve247

How do you decide on which fund to choose? The info I have on hand is average annual returns (3mo - 10yrs), yet I could always research for specific criteria.

Now let's say I follow Legendkiller's recommendations. For Large Caps at 15%, should I choose several that total 15% or just choose one?

ray

If your employer matches, contribute at the minimum up to that percentage.

smeakim

Well what I do is look at the returns over time. Remember your retirement is based on the long haul. I look at the 3, 5, and 10 year returns. I looked at what their expenses are and base my decisions on those factors. I read a lot of headlines from yahoo around business to give me an idea of what is going on in the marketplace. I look at funds that have average expenses or low expenses and good returns. Why pay high expenses to a fund manager if their returns are not as good as other funds.

latingirl

Something to think about....

Of course, contribute up the maximum your company matches because that's free money that should be taken advantage of. But if you want to invest in a 401k plan beyond the match, invest your "after-tax" dollars. That way your money will be taxed at your current tax bracket and not your (hopefully) much higher tax bracket when you retire.

I like to find as many ways NOT to give away money to the gub'ment as I can.

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smeakim

Yes but thats assuming you will be in a higher tax bracket. When you retire if you make no money and only take out 401K money you are only taxed at the rate of how much you take out. You have to really do the math and figure it out. Not say it is bad but using a ROTH and 401K allows you to hedge your bets and off set your tax liability. You have to figure if you are going to still have a house payment? Will you work part time? You have to figure out all sorts of stuff to determine if you will be in a higher tax bracket based on your future circumstances and how much money you have to withdraw to live they way you want.

verve247

There is some great information being posted here.

What are people's opinion's on REIT's? They seem like they would make money in the longrun

zippyjuan

REITs are Real Estate Investment Trusts. What do you think real estate is going to do in the future?
I look mostly to low cost index funds instead of trying to find an individual fund. Fidelity and Vanguard have good ones. Expenses eat into your returns. With costs, the average investor will do worse than the average fund over the long term so why not just be average and keep the costs as low as you can? Avoid whatever has been hot. These stocks and funds most likely cannot maintain that return over the long haul.

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YellowCoffee

There are a bunch of different kinds of REITs that invest in both residential and commercial properties. These have done extremely well over the past 6 years, but the future for these funds seem uncertain. IMO, I would stick with residential apartment REITs like AIMCO. Rents are edging up higher these days and costs (purchase price of the assets) seem to be steady. I would think that the disposition/aquisition segment of the trusts would have very modest growth, but the servicing (collecting rents, etc) would be bolstered up a bit.

Just like someone mentioned above, I would stick with Vanguard/Fidelity no-load funds. Vanguard Star Fund is a balanced fund with approximately 60% equities and 40% bonds. Good luck