Some of the literature that I've seen says that you should plan as if you will live into your 90's.Those in their 20s will likely live to the 90s, and females especially.. It is not unreasonable to expect money in the stock market to, on average, double (after inflation) every ten years or so.That would take a 7% gain over inflation. Inflation has been 3-3.5%, so you are looking for 10.5% of more annual gains. That was true in the past for long periods.William Bernstein will disagree with you. He sees stock market returns singificantly lower (see The Four Pillars of Investing) for the coming decade or two, at maybe 2.3% 'real growth', or maybe 6%. If you are lucky a bond find might double (after inflation) in something like 20 years.Bond funds have doubled in the past 3 years......while stocks are barely back to where they were (and that assumes you didn't invest in any dot.bombs). You need to own both in a diversified portfolio, across many market segments. If you want some diversification from just owning corporate stocks you might check out the Vanguard REIT Index fund to get some real estate exposure instead of the bonds. While a REIT fund spins off high return like a bond fund, the primary value tracks the equity market closely. It is half/half. When your are deciding how to allocate your investments just remember that a large percentage of the large cap stocks earning cone from their foreign operations and sales. As I recall about 30% of the S&P 500 earning come from international sources so it is possible to end up having a high foreign exposure unintentionally. You still want some foreign stocks that are not dependent upon US markets, US labor forces, US corporate tax rates, the US dollar, US consumers for much of their revenues. Until you have a large amount in your IRA just investing in the total stock market index fund would be a reasonable thing to do and you wouldn't have to worry about rebalancing it each year.Often the easiest way to rebalance is to put your new contributions into what needs correcting, so you have close to your ideal after your contributions. That way you don't have to buy/sell within your plan as often. Keeping within 5% is more than sufficient. t.
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