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Author: BookmFool Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76106  
Subject: Re: 401k Investing Date: 2/21/2002 8:44 PM
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Hello Dan:
I've just changed my future allocation to be
55% s&p500
28% Mid cap index <.3% expense
17% Small Cap index <.3 expense


As pauleckler said, an S&P 500 is a solid core holding. Large caps are the market's backbone, and are solid investment choices. And diversifying among other classes of the US equity market such as midcaps and small-caps has been shown to make for a less volatile portfolio. Just try to remember the last decade where the Russell 2000 had the top returns in the early 90's, then large caps dominated in the mid 90's, and small and mid-caps in the last few years were ahead of the bunch. The following is an example: http://www.rkfin.com/periodictable.htm .

I have been investing with individual stocks in my Roth and have done pretty well (Thanks MO!) But am a little worried that we may find the S&P not growing very much the next couple years.

Are you worried because you'll be needing your 401k money to live on in that period? Are you near retirement? If not, and you believe in your strategy, and the theory behind indexing, short-term market performance shouldn't stop you from sleeping at night. If one tries to base one's success on their portfolio's performance over a 1-3 year period, one will surely end up chasing one's tail.

It seems that all the big companies are having their values pressured as accounting concerns continue making their rounds.

Just think about what's been happening the last week or so. On a down day, the news has been "The markets sank today on concerns about accounting practices." So, people are selling based on possible problems. Not that these companies fundamentals have changed, but on a maybe. Traders base their decisions on short term movements and events like this. Investors however, have a LTBH outlook. I think you're on the right track with your current portfolio.

HTH

Bookm
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