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Financial Planning / Foolish 401(k)s


Subject:  Re: Allocating within employer plan Date:  3/7/2021  12:19 PM
Author:  Macroman77 Number:  26344 of 26346

If you're asking this question I would say that by definition you are not an idiot. If you're looking for an allocation that you'll keep for the long term I would match the market's allocation. According to Vanguard's Portfolio Analysis Tool the current US market split is 71/21/8.

You mention wanting to be aggressive. To me this would mean under-weighting Large Cap and Over-weighting Mid Cap because I believe there is higher growth potential there right now with the huge run that Large Caps have enjoyed. I would not over-weight Small Caps because I believe that a lot of Small Caps are zombie companies that will not survive once extraordinary support ends. Taking an aggressive approach you may want to adjust your portfolio balance as conditions change.

You don't mention International. I think the potential for International growth is strong and I think that it is a mistake to entirely leave International out of your portfolio. Vanguard has been recommending about 30% International.

I think that you can progress much further in your investing journey by focusing on choosing good individual stocks for the portion of the portfolio that you can control than by trying to micromanage your 401k. I think of the 401k as a safety net that allows me to take appropriate risks with my individual stock selections. I just use a target retirement fund in my 401k and don't even look at it.

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