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..and I really need some assistance with my 401k plan. I only have about 5k in it and I want to know whats the best way to distribute my
contibutions? If I contribute 10% of my salary, what types of funds should I invest in? 2% Large cap, 2% International Growth Fund?, and etc... I obviously need to be aggressive to catch up. As you see, I have no idea how to handle the fact that I have only 25 years left to invest. Any guidance is greatly appreciated.

JB
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First, stay out of this market until it gets better.

Take the time to read some good books on technical analysis - Achelis has a good reference. Also, read some of Cramer's books on the market.

Get some good tools to help you. Fasttrack is what I use, along with two programs that work on the Fasttrack database, Trade and FastBreak. Learn how to read charts.

It does not take a crystal ball to see what is happening in the market - the technical indicators look just terrible, and anybody can see that. You just have to look.
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First, stay out of this market until it gets better.

What's the old saying, buy low, sell high? Seems to me now is a good time to DCA into the market, not stay out.

-murray
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If I contribute 10% of my salary, what types of funds should I invest in? 2% Large cap, 2% International Growth Fund?, and etc... I obviously need to be aggressive to catch up. As you see, I have no idea how to handle the fact that I have only 25 years left to invest. Any guidance is greatly appreciated.


25 years isn't too bad. Especially if you can also put away some extra in regular taxable accounts.

As far as allocation, check out Paul Farrell's lazy portfolios
http://www.marketwatch.com/news/story/lazy-portfolios-sparkle-07-new/story.aspx?guid=%7B73F4BC3A%2DD0EF%2D4BFA%2D9698%2D01D8DA27C91A%7D

or, tinyurl'd for your convenience:
http://tinyurl.com/2sncfj


Vickifool
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I really need some assistance with my 401k plan. I only have about 5k in it and I want to know whats the best way to distribute my
contibutions?


Figure out which of the funds is closest to being an S&P500 index fund. Put 100% of your 401k into that.

Um, BTW, 25 years is a plenty enough long time. I went from a 5 digit portfolio to a 7 digit portfolio in about 12 years--encompassing both the dotcom boom and the subsequent bust.
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Figure out which of the funds is closest to being an S&P500 index fund. Put 100% of your 401k into that.

Joel, why do you spend all that time on VooDoo, when it is just this easy.


I went from a 5 digit portfolio to a 7 digit portfolio in about 12 years

Consider yourself a fortunate son. Using the S&P monthly returns and adding an annual contribution of $12,500 a 5 digit portfolio grew to a 7 digit portfolio on only 7 of the 184 twelve year return periods since 11/1980. This primarily culminated in the 10/1999 - 4/2000 time period. Of course the portfolio was still only worth the same (just at 7 digits) in 2006 - even while still making the annual contribution - wow that sucks.

Of course if you started in January of 1996 you would have almost $400,000. (the worst return in the test period) Lets see $100,000 + (12 * $12,500) = $250,000 in total contributions and only $400,000. That is about 5% return. What a smoking deal. Even better - putting in the $100,000 at 1576 and being now at 1333 and then even with the $12,500 annual contribution your still back to 5 digits. Opps.

100% - the entire 401(k) in an S&P fund - STUPID IDEA

Look, its late - forgive me - I don't mean to flame on -johnny! but please all of it in S&P!! scooby doo says sccaaaaaryyyy!

d(S&P)/dT is negative.......

Who thinks Voodoo is better!
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First of DO NOT FOLLOW THIS ADVICE:

>----
First, stay out of this market until it gets better.

Take the time to read some good books on technical analysis
>----

It is about impossible to use technical analysis in most 401Ks.

Personally I do the following:

Prefer one of these companies: Vanguard, Fidelity, or America Funds.

Look at the the 3 and 5 year returns, pick the higher ones.

Look at the expense ratios, pick the lower ones.

If you cannot decide between 5 of the funds, 20% each. If you like one twice as much as the other, but 30% in one, 10% in the other.

It is kind of a crap shoot, but you can bet on the pass line and take odds.

The key might be to increase savings every time you get a raise.
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>> What's the old saying, buy low, sell high? Seems to me now is a good time to DCA into the market, not stay out. <<

DCA maybe, but not go all in. I'm not much of a market timer but I have to agree with Joel that this market is terrible and I've seen no indications that it's in the process of changing yet. As seen *yet again* today, virtually every single rally is met as an excuse for skittish longs to head for the exits. We have had a LOT of intraday three-digit up days wind up DOWN three digits in the final hour or even sooner. That is one of the primary indicators of a really, really bad market.

I personally think the uncertainty has caused the selloff to be overdone, BUT in the near term, this market is simply horrible. DCA is probably a good idea but I don't like the idea of plunging headlong into it.

#29
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DCA maybe, but not go all in.

Read the OP again, they only have $5k in now and contribute 10%. It's hardly "all in".

-murray
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Using the S&P monthly returns and adding an annual contribution of $12,500 a 5 digit portfolio grew to a 7 digit portfolio on only 7 of the 184 twelve year return periods since 11/1980

Why did you look at such a small time frame?? FWIW, I looked at growing a $99,999 portfolio to $1,000,000 with $12,500 annual contributions for ever 12 year period since 1871 using monthly data. I came up a bit better at 214 out of 1499 or 14.3%. The last 12 year period I have it working ended in February of '01.

Just the same, you should weigh any fund choices against a broad based index such as the S&P; if the fund isn't beating the S&P over a 5 or 10 year time frame, what benefit does it provide to your portfolio? There are certainly some managed "growth" funds out there that suck so be careful of picking funds for the sake of diversifying.

-murray
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>> Just the same, you should weigh any fund choices against a broad based index such as the S&P; if the fund isn't beating the S&P over a 5 or 10 year time frame, what benefit does it provide to your portfolio? <<

Small caps significantly underperformed the S&P 500 for several years leading to the 2000 peak. Dumping a good small cap fund in 2000 because it lagged the S&P 500 since at least 1994 would have really been a bad idea in the years that followed.

Maybe you mean that a fund should be compared against its relevant index benchmark?

#29
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Maybe you mean that a fund should be compared against its relevant index benchmark?

I didn't mean that specifically, but it's probably good advice.

-murray
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Why did you look at such a small time frame??

Cause I lazy!!!!

encompassing both the dotcom boom and the subsequent bust.

or maybe, Cause the only dotcom boom I could think of happened post 1980! and I figured that went back far enough to include any ramp up to the peak. And that left the noxt 6 years with a negative return - But I would be interest in just how many periods your 214 returns really represent.

d(1980)/dT
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HI Jbarken

Like you I am "late" to the contribution party and am playing catch-up.

Like other posters, I do recommend picking up some good books and weigh your options depending on your risk taste.

As for today's market, historically when the interest rates drop, the market drops. Band-aids only prolong the negative. This market has not hit bottom, so I would not go in as of yet.

Of course, I'm in China, so my perspective is very different.

I am invested in all the markets including US. To do well, seek a diversification that suits your taste for risk. If you do like international investing be very careful of China. Mainland China, not Hong Kong. The Mainland govt is putting in place the mechanism for mainland investors to come into the Hong kong market. The main reason the China market has done so well, is that they have no where else to go. When they have an alternative, China will drop like a rock. Hong Kong will be the winner. China based, Hong Kong/New York traded companies have pricing parity. The same company in Shanghai trades for 50%,60%, up to 100+% more. So, I would stay out of China index funds. Hong Kong index fund has outperformed the S&P over the last 20 years. The dynamics of Hong Kong are about to radically change, trippling the pool of available investors, this has never been seen anywhere before, ever! If Mainland allows overseas retail investing in NYC, you will think an invasion has occured at unprecidented levels, but I would give this 8-9 more years.(the same amount of time for full democracy in Hong Kong, according to the Hong Kong Basic Law ie constitution)

So best of luck. Read-up you will do well.

HH
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As for today's market, historically when the interest rates drop, the market drops. Band-aids only prolong the negative.

I thought it worked the other way around. As in the seventies.

Doug
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One would think it was the other way around but it is not.

It is a function of liquidity and time lags. By the time the cuts work through the system the market would have dropped because of liquidity.

In this market, the rates are cut, but at the same time lending slows down. so while it may be cheaper, there is less money in the system. Less money = less buying = market drop. The lenders are not equiped to putout what they do not have. Unfortunately it is the love affair with debt that has this system in a mess.

I think for retirement one needs to think out of the box and globally. For ballance look for established well run companies that are not tied to the USA.

Of course, I'm old school. Don't spend what you do not have. Owe no one, own outright. Save 30% of disposable income as a minimum. Purchase off-shore limited companies as your own ($3,000) and the off shore accounts. Contract with your employer as a "company" not an individual. Your income is then in the form of director fees from "your company".
An alternative to the "inc" structure is the living trust, or you can have a combination of both.

The system is available to all people who have the wherewithall to seek it out, but it seems the wealthy are the only ones to take advantage. Structure is the key, not the amount of $ in the bank account.

HH
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Of course, I'm in China, so my perspective is very different.

I am invested in all the markets including US. To do well, seek a diversification that suits your taste for risk. If you do like international investing be very careful of China. Mainland China, not Hong Kong.


This is why I love the internet!

Vickifool
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