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Investing/Strategies / Retirement Investing
|Subject: Re: Undiversified 401K||Date: 2/23/1998 11:18 PM|
|Author: tc001||Number: 1939 of 78166|
Pixy's reply suggesting that you look at Vanguard took the words right out of my mouth. Let me add a few things to that.
<I wonder if I am better off leaving that large position in Contrafund alone so as to take advantage of
the compounding associated with a larger holding.>
If I understand your statement, this is an incorrect assumption. There is no additional compounding gained due to the size of the holding. For example, $100 earning 10% per year would result in $110 at year end. If you split it into five lots of $20 each, each would be worth $22 at year end, or $110 total. The size of the holding is irrelevant to the amount earned through compounding. In some savings accounts you may get a better rate with a larger deposit, but that is a rate issue, not a compounding issue.
You also wrote:
<I have about 96% of my 401K invested in....>
While discussions about portfolio diversity do refer to percenta