No. of Recommendations: 4
First, I'd recommend using index funds over actively managed ones. Costs matter a lot - the average mutual fund underperforms by the percentage of costs.

Second, choose an allocation to small caps, large caps and international stocks. If you are aggressive, you can weight small and international higher. I used something like 40 large, 30 small, 30 intl.

Third, don't shift into the "best performing" sectors - recent high performance is one of the worst indicators of future performance. I'd recommend that you rebalance your allocation between the three sectors and company stock on an annual or semi-annual basis, if something gets more than about 5% out of whack.

Over time, different market sectors tend to outperform: small caps for a while, then large, then international, etc. Rebalancing helps you to invest in things when they are down and sell them when they are up - buy low, sell high.
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