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brian m | How should I allocate my Roth 401k contributions? |
I am 24 years old and I am going to begin contributing into a Roth 401K retirement plan. I'll start with 10%. Please review the funds that my company offers and advise what would be the wisest investments at this time in my life. I assume that most of you will suggest going aggresive early on and I agree. Thanks in advance for the responses, and please answer only if you have some real experience because I'm trying to learn from you guys.
Short-Term Fixed Income
Stable Value
Government Inflation-Protected Bond
Core Bond
Intermediate Bond
High Yield Bond
Large Cap Value Index
Large Cap Value
Growth and Income
S&P 500 Index
Large Cap Growth Index
Mid Cap Value
Mid Cap Growth
Small Cap Index
Small Cap Core
Small Cap Blend
Intl. Large Cap Value
Intl. Large Cap Index
Intl. Large Cap Core
Intl. Small Cap
Firm Common Stock
or you can just choose 1 of these:
Moderately Conservative Portfolio
Moderately Aggressive Portfolio
Aggressive Portfolio
Additional Details
Thanks for all the responses so far! Just a few more details. I'm an Operations Analyst in the management development program at JPMorgan Chase. The firm does provide matching contributions so I will be taking advantage of that. Should I only contribute the maximum amount that they will match or is it ok to contribute more? Also, my rationale behind taking the Roth is this... I figure taxes will rise in the future so I would rather pay them now while they're lower so I can keep more money down the road. Also, the firm just sent me some books to look through so I can do my homework on the different funds that they offer. Thanks again for all the responses. I'm the first in my family to go to college and get a good job so I didn't have a lot of people to ask for advice. I really appreciate everybody's advice! |
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muncie birder
|
Without knowing who is managing each of these portfolios, it is somewhat problamatical to provide a real good answer. However, personally I would favor a somewhat conservative approach. After all we are talking about your retirement funds. Maybe 25% in intl. large cap core. 25% in core bond. 20% in growth and income, 20% large cap value, 10% mid cap growth. Something along those lines but it is important that the funds you are invested in have low expense ratios and decent track records. Some offerings do not. |
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Kiker
|
I would not choose a portfolio allocation that someone else has listed as being aggressive, or whatever. Your definition of aggressive will be vastly different than theirs. A B.S. in finance will not help you here...no more than a M.S. in finance, as I have had clients with these and they still found themselves sitting in front of me.
There was a post here that made a very good point, we don't know who these managers are or what their top holdings are. In order to determine the Intrinsic Value of a Fund you need to do a Qualitative and Quantitative analysis of these funds...this sounds touhg, but it really is quite easy. Trust me on that.
But, since you are not supplying that information, I will just give you my two cents on what is here:
Operating off of your age, 24, I would say an aggressive approach toward investing is a viable approach.
45% International Large Cap Value
30% Large-Cap Value
20% Mid-Cap Growth
5% Government Inflation Protected Bond
Once a year, ususally towards the end, you should look over your portfolio to make sure it is stil within these percentages. If not, readjust it so that it is with the extras going into the Bond fund at the end. Think of the bond fund as your savings account in your portfolio, where you capture your gains from the year and store them there for retirement. The other funds are there to give you exposure to high growth areas in the Global Market, in order to help you generate positive returns to capture.
AWESOME job on sticking with the RothIRA. You are paying the least amount of Federal Taxes right now!! It will only get worse, so better to save yourself from Uncle Sam taking your retirement in the future. Anyone who says otherwise is a full-blown idiot!
Hope this helped. |
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Carlos R
|
2/3 aggressive
1/3 moderately aggressive |
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john m
|
These are Fund Types that you have listed. You should first do some home work on the Specific Funds that are being offered. If they are Insurance Company Funds that MIRROR the performance of ACTUAL FUNDS that you can track in the Wall Street Journal, that may be ok, but be sure to track them & compare tham regularly. You should get a Statement at least once a quarter, so that you can assess performance.
One of the August issues of Forbes Magazine is their Annual Mutual Fund Issue. Get it at your local library and study the fund performance history ratings of the specific funds in both up & down markets & read the accompanying articles. Many magazines publish an annual mutual fund issue. but this is the most comprehensive study that I have seen.
Then you should probably consider a Domestic Medium or Large Cap, an International Medium or Large Cap, a Domestic Medium Value Fund (hopefully all from the same fund family) and that families Money Market Fund (to park some of these monies in, when the market is worrying you). You should probably emphasize Equity funds, because of your age. You can gradually get more conservative later.
Stay away from Firm Common Stock investments, like they were the plague. If the company ever goes "belly up", you lose both your job and your retirement investment. There are horror storys galore on this problem. |
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Fenno Street
 |
As another response indicated, not knowing the asset manager/firm, one cannot be certain as to the composition of the various funds. That being said, your age would suggest an equity portfolio:
40% S&P 500 Index
25% Intl. Large Cap Index or Intl. Large Cap. Core
20% Small Cap Blend ( or Sm. Cap Index --- the closest to small cap value style )
15% Large Cap Value
Note that since the late 1920's, the small cap value asset class has outperformed large value by a considerable margin. As such, whatever asset mix you select should include at least 10-15% U.S. small cap.
Good investing --- and as soon as you are able, max out the contribution. You will thank yourself later. |
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Larry B
|
Congratulations on finding a firm that offers a 401k. Some also offer some type of matching funds so be sure and take full advantage of any type of company contribution in addition to your 10 percent.
No matter what you pick, you will do just fine. I personally like stocks and would recommend you split your contributions into 5 different areas, or 20 percent in each of the following. One year is not going to be enough time to determine what its going to be like in the next 5 years. There was a time not so long ago where gold was selling for 300 dollars and ounce, and now is in the 800 dollar category. Everything is going to go up....and everything is going to go down, by doing a monthly contribution, you can take care of "Dollar Cost Averaging." Actually you want the market to go down, so you can buy more share today then you could 6 months ago.
. I can only assume the company common stock is one of your options. If you trust your company to maintain any type of growth pattern, I would put 20 percent into the company stock.
20 percent into the small cap fund
20 percent into the Growth Income Fund
20 percent into the S&P 500 fund
20 percent into the mixed capital Growth fund.
By having your monthly contribution into 5 different areas, you will get a good idea on what works and what does not. Keep in mind, what works this year, will not work next year., however over the long period, 35 years in your case, as long as you invested in stocks, you will do well.
Pay close attention and find out if your company offers any type of matching contributions, and put in the maximum amout you can to take advangage of any company matching contributions.
Good luck. |
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MVD34
|
25% Government Inflation-Protected Bond
50% S&P 500 Index
25% Intl. Small Cap
All things being equal (they never are. Low cost, true index funds are always the best choice) until you reach $100,000 in assets, then we will have to sit down and talk.
------
or
----
100% Aggressive Portfolio
(assuming it has a true mix of low coast domestic and international index funds within it)
And we never have to talk again. |
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bzimms
|
aggressive portfolio... or moderately aggressive if you are a little risk adverse |
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danilli
|
aggressive growth with no doubt, your only 24 if anyone says anything else they are clueless |
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JSAL21
|
First of all, I would reconsider the Roth IRA- a traditional IRA has proved to be more profitable, just read the Wall Street Journal. Secondly, you want to invest agressively when you are young, not much to lose and you can take the hit. Still diversify, but put no more than 40% in bond.. i would recommend a 80-20 or 70-30 equity portfolio. international large cap has been spectacular over the last 3 years, ,but can be risky,, large cap growth and small cap core could be good. blend and core mean the same thing FYI. |
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Michael F
 |
put it all in a money market account till this mess blows over..
Unless you want to lose money!! |
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