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This is why I highly recommend not being 100% in stocks. Even young people should own at least 15% to 20% in bonds. Most people can't handle the risk of a 100% stock portfolio.
The typical balanced mutual fund, which usually holds a 65% stock / 35% bond asset mix, lost 28% in 2008. If you pick one of the better funds with below average expenses, you did at least a little better than that. The good balanced funds come close to matching the performance of the stock market with less volatility. See if one of these funds is in your retirement plan:
Fidelity Balanced
Fidelity Puritan
Dodge & Cox Balanced
Vanguard Wellington
Oakmark Equity & Income
T. Rowe Price Capital Appreciation
American Funds Income Fund of America
American Funds Balanced
American Funds Capital Income Builder
Invesco Euqity & Income
Vanguard Balanced Index
Stick with one of these funds for decades and you'll do fine without the stomach churning volatility.
you have short term bond funds , intermediate term , long term.
you have reit income funds , inflation proof bond funds , international bond funds , emerging market funds .
high yield funds , floating rate funds like fidelity floating rate high yield.
you have income funds that are bonds linked to commodity indexes too.
depending on where we are in the interest rate cycle there are income type funds that work better than others.
cash and equities can be a good choice if bonds start taking hits.
today i want my fixed income side flexible to shift with the bigger picture . i don't want conventional bond funds if bond yields rise . they are fine for now , and in fact were fine for 35 years as the trend for yields was down.
but we are on the edge of turning the corner on something that existed for mostly all of our investing lifetimes and that was sitting static in bonds worked out well and added to the party..
I was just giving people choices as these are typical balanced funds that populate 401k plans.
Mathjak says "no" but he is an advanced investor who likes to split hairs.
Will one of these funds offer perfect diversification? No. But perfection is the enemy of the good.
And several of these funds will regularly hold cash if they aren't finding good deals in the stock and bond markets. The American Funds are noteworthy for their willingness to hold cash in all their funds when managers deem necessary.
Oakmark Equity & Income is currently 16.97% in cash.
Invesco Equity & Income is 11.98%.
T. Rowe Price Capital Appreciation is 9.89%.
American Balanced is 7.24%.
Income Fund of America is 5.68%.
Capital Income Builder is 3.34% (on the low side).
Last edited by mysticaltyger; 02-22-2015 at 05:11 AM..
amfest the biggest decision is your own pucker factor through the various stages of your life , the accumulation stage , pre-retirement and in retirement.
for some they never change , others have very specific models for each stage.
if you really want a good solid plan and maximize compounding over as much time as you can you do not want to spend time in asset classes that provide less return than you are able to tolerate. so you need to do a bit of preplanning first and learning about your own risk tolerance.
time is your biggest friend. wasting time in a balanced fund at a young age if you have a high pucker factor would historically been wasting valuable compounding.
not sure if you mentioned that factor or not but just in general that is my view and why i also dislike target date funds trying to pigeon hole everyone into one size fits all as one size rarely fits anyone right..
if i was gun shy i might go 35-40% balanced fund , add a total bond fund , some short term bond funds to hold my cash as options on lower stock prices and i would have a more aggressive corporate bond fund too. last year a good corporate bond fund did alot better than total bond whicjh is a more conservative, diversified bond fund . .
but if rates and inflation kicked up i would move my fixed income to reit income funds , floating rate funds , inflation proof securities and perhaps an income fund linked to a commodity index , all while keeping things static in the balanced fund.
that is what i would do.
personally right now i am about a 50/50 split between 2 portfolios. one is the balanced portfolio i mentioned and the other a growth and income portfolio concentrating more on dividend paying mid cap and large cap stocks with a splattering of bond funds. it is about 70% equities.
as bonds have stalled i moved more to the growth and income model the last 2 weeks going from about 70% the balanced model/ 30% the growth and income model l to 50% in each model .
but i am in retirement mode as well or i would be 80-100% in a growth portfolio giving extra weight to mid-caps as of this moment.
Last edited by mathjak107; 02-22-2015 at 06:30 AM..
I think it is not so much your age but how long you have been investing in 401ks. Your investment choices and company match helps.
My current 401K I started in fall 2006 and by fall 2014 I had around 400K in it and that is starting from a balance of zero.
Someone who graduated college Spring 2006 could easily have 400K in their 401k and be only 30.
The numbers quoted in the second paragraph seriously put into question the supposition in the third. I would be very interested to learn how someone who has been investing for just over 8 years in a 401k (with everything that happened between 2008 and 2011), maximizing contributions (even with the over-50 bump) and getting a generous company match could accumulate even 300K in that time, much less 400. And, I work in "the industry".
And, that's the problem with these kinds of threads. The veracity of information presented is highly suspect.
the data does makes little sense. starting at zero i get an 19% compounded return needed starting in 2006 and ending today which is higher than ever to see 400k .
assuming 401k max's starting at 15k and going to 18k .
the s&p returned about 7.50% with dividends so 400k seems a bit far fetched. even 2x the s&p return wouldn't do it assuming you were a wiz kid.
it would take annual defined contribution limits by the employer which can go 40k plus to hit that but that was never mentioned as a factor.
employers can contibute a ton of dough on your behalf aside from what you contribute but they have to do it for all like employees.
for 2015 it is 53k combined total , you and them..
of couse if we did call the poster out on it and he didn't realize the numbers didn't jive now he could say it was employer contributed giving them an option to explain the amount even if not true.
Last edited by mathjak107; 02-22-2015 at 07:03 AM..
the data does makes little sense. starting at zero i get an 19% compounded return needed starting in 2006 and ending today which is higher than ever to see 400k .
assuming 401k max's starting at 15k and going to 18k .
the s&p returned about 7.50% with dividends so 400k seems a bit far fetched. even 2x the s&p return wouldn't do it assuming you were a wiz kid.
it would take annual defined contribution limits by the employer which can go 40k plus to hit that but that was never mentioned as a factor.
It not only makes no sense, it's patently absurd. I did the math and - even assuming a generous match of 6% and no over-50 "catch up" contribution - the 400k number works out to a 280% increase over just over 8 years, where 5.5 of those years were spent catching up to the equity high of October 2007.
Lots of the other Millenial nonsense put forth here is absurd, as well. It's just that this particular post was completely off the deep end.
And, BTW, being a "Wiz Kid" has nothing to do with how a 401k plan investment is managed, with its completely defined fund selections and high investment fees.
but employers do have a different limit on their side they can contribute so it isn't impossible if that is how your company does things. it is not all that common and of course someone would tell you that it was done via defined contribution limits on the employer side which are 53k today that they can put in a 401k on your behalf.
the 53k is comnbined total allowed for you and the employer added up..
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