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My wife was recently laid-off and we've been rolling over her various 401k accounts and retirement profit sharing accounts. I've done a lot of research on funds and have her 401k roll-over invested as about 80% targeted toward growth funds and 20% in bond funds. We're about 25 years from retirement.

Up to this point, the amount invested totals about $30k. But the last of the roll-overs has happened and the amount posted to her account is substantial (150k). I'll be honest, I'm nervous about what we should be doing with this money if only because it's the most money I've seen in my life.

I know that we want growth of this money, but should we follow the course of growth/aggressive growth for the next 15-20 years? Should I look at the same funds we've been using (performance is good to okay) or start blending the existing mutual funds with index funds and individual stocks?

Any opinions welcome as to getting me started for further research.
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No. of Recommendations: 2
Well zentec seems you and I have been with the fool for about the sametime. Here's a previous post of mine that may help a bit...

There are some sample portfolios there that might help a bit. I only list asset classes. Not sure what research you've done but here are some books/articles that might help:


Here's the link to model portfolios:

I'm a buy and hold guy myself, rebalancing every year or so. You're right aggressive growth is the way to go but it depends on you (and your wife's) risk tolerance. My wife doesn't want to look at this stuff so I end up managing it all which suits me fine since I enjoy it.

Here's a cool website as well by William Bernstein (an actual brain surgeon...go figure.)

He wrote three books. I've read two.

The Intelligent Asset Allocator

The Four Pillars of Investing

Then you might want to check out Burton Malkiel:
The Random Walk Guide to Investing

or the more famous A Random Walk Down Wall Street

I've modeled my portfolio taken bits and pieces from each of the above sites and have managed to do fairly well. I focus on mostly index funds but do have some actively managed ones. I never pay more that 1% for any fund as there are so many options that you can always find one with your appropriate goal for under 1% expense ratio.

Growth/Aggressive is good but you want to diversify so you can moderate your risk somewhat. Remember the more risk the more return but you can have some very rough years (Can you handle a loss of 30-40% in a year?)
I have 100% equity allocation and will tone that back as I get closer to retirement, investing more in short term bonds. The above books will give you a great start to the world of investing. The Random Walk Guide to Investing can be read in an afternoon so I would start with that one.

Best of luck to you!


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No. of Recommendations: 3
Zentec, I think you need to scope out an overall financial plan for your life. Your family. Their needs. Housing. Education. Retirement. Where will the funds come from?

As noted before on this board, by the time you hit 40, you should have something like 8 years of gross income (or gross living expenses) in savings/investments if you plan to retire early on investment income--espeically if you are thinking of early retirement. That is a substantial sum. Management requires experience and confidence. That is a good reason to start early, so you can learn to do it well as the numbers grow.

If you are far less than 8 years at 40, realize this means you will either not be able to retire, or you will be dependent on Social Security and company pensions. So you should be shopping for a lifetime employer with a solid pension plan.

Realize that Fooldom essentially teaches that index funds are a conservative investment. They have a steady growth rate over the long term. Its a safe place to put your money (but you must learn not to panic during the occasional correction). The reason for index funds over bonds is that index funds tend to give better returns--especially now when bond yields are so low. Plus a few very good years in index funds can do wonders for your balances.

So I would use an index fund, S&P 500 or total market, as your core investment for at least 50% of your funds. Bonds are OK, but personally, I would not waste my time on them. The rest of your funds can be in index funds while you learn, but diversification in a combination of international, real estate (usually in REITs), hot sector funds, and individual stocks is certainly OK, as you learn to spot good ones. But in that latter group, maintain diversification. Do not put too much in any one investment.

Good luck.
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Lots of good reading and advice. Thank you both.
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Bernstien and Malkiel have written books based on a very faulty perception of the market, and bad mathematics. Stocks do not vary according to a random walk, nor do they behave according to a normal distribution. It amazes me that people ever have believed that stuff.

For some sound mathematics, see Mandelbrot's "The (Mis)Behavior of the Markets". Unfortunately, this book will not tell you how to trade, but it does completely debunk the other stuff.

I should point out that the Bernstein, Malkiel school of analysis of the markets was what got us the Black-Scholes option estimation. This, in turn, led to the Long Term Capital Management fiasco.

For stuff that may make you some money, try Alexander Elder's "Trading for a Living", and O'Neil's Books on CANSLIM.

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No. of Recommendations: 6
joelxwil wrote:
Bernstien and Malkiel have written books based on a very faulty perception of the market, and bad mathematics.

This is NOT true.

Stocks do not vary according to a random walk, nor do they behave according to a normal distribution.

This IS true. However the difference is very very minimal, and simply not big enough to base any type of successful trading strategy.

For some sound mathematics, see Mandelbrot's "The (Mis)Behavior of the Markets". Unfortunately, this book will not tell you how to trade, but it does completely debunk the other stuff.

As a former electrical engineer focusing on communications theory, I have read many of Mandelbrot's works on fractal geometry. Nothing in his book about the market should surprise anyone who has been around the market for an extended period of time. Nothing he says 'debunks' any of the investing principles put forth by Bernstein or Malkiel.

The fact is that the disturbances to traditional statistical methods that Mendelbrot has described, are so minimal that they do not contribute statistical significance to any of the movements in a properly diversified portfolio.

In fact, the effects noted by Mendelbrot have been descibed in a different way by Malkiel and others by what is called the Weak Form of the Efficient Maret Hypothesis. In this hypothesis, it states that for short periods of time, the market is NOT efficient, and therefore does not conform to standard statistical methods. However, this period is so short that there is no way to capitalize on it in any kind of trading system.

This effect that Mendelgrot has described in terms of fractal geometries has been studied by statisticians for decades. Please read my post from 12/16/00 on the Foolish Four Board, at

Here is part of it (for those of you who are not mathemeticians, skip down to the last sentence where I summarize the implications):

"OK. I will get into a little of it, but the limitations of a regular keyboard make mathmematical discussions painful and hard to understand.

You are partially correct about my personal experience with probabilitic issues. However, almost all the stochastic processes we use in control and communication engineering are constructed to have some sort of stationarity. For others who may be reading this, stationarity can be pictured intuitively as the absence of any drift in the ensemble of member functions as a whole. More to the point, the past history of a stationary stochastic process can be used to predict the future of the process in a probabilitic sense. This speaks to the very heart of this stock market discussion.

There are actually three main flavors of stationarity. Assume a stochasatic process

[X(.,t);t member set gamma]

It is called first order stationary if:

Fx(z,t1)=Fx(z,t2) for all (t1,t2) and all real numbers z.

Similarly, wide sense or second order stationarity (also sometimes called covariance stationary) is described:


for all (z1,z2) and all allowable (t1,t2,tau)

Lastly, the one that I believe is most germaine to us in analyzing the stock market is strictly stationary as follows:


for all sets of real numbers (z1,z2,...,zn)

(this is very difficult to do, and I don't think this is a very good place to be discussing details of probability theory, so I think I stop here)

It is my contention that unless the market can be shown to be stochastic and strictly stationary, many tools used by the statistician are of questionable value.

However, it may be that the market is close enough in many situations that these tools would give a reasonable result."

This whole discussion is just another way of saying that the market doesn't exactly conform to normal statistical methods, just as Mendelbrot points out in his book, but it is close enough to allow the modern portfolio theory to work just fine.

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A few comments.

If you have been successful with your investing so far having more cash to invest does not really change much. Your age and your situation will definite more the constraints.

On average, individuals who manage their own retirement accounts take too little risk. They tend to be more in cash then they should be given where they are relative to retirement, etc. This has been studied a number of times. The issue has to do with risk tolerance and knowledge of investing.

If the numbers make your nervous you need to work on it. As you get older you should continue to have more and more to invest. Hence the numbers will never get smaller if you are on target. Education will do a lot to help. If you can not grow into being more comfortable consider hiring someone to manage the funds.

You have a pretty long time horizon to grow the funds. If you work back from what you would need to retire you might find that what you already half is rather small or behind the curve. That is another way to get comfortable about the numbers.

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