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newbie 401k?
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<blockquote data-quote="mountaingoat" data-source="post: 308274" data-attributes="member: 1250"><p>You're 22. Assuming that you'll retire at 65, you have 43 years until you need the money. That's a LONG time horizon. Equities (stocks) over time have consistently returned 9-12%. Yes, there are years when it returns less, but you have to look at the long term.</p><p></p><p>As far as what percentage, I would have to agree with all the other posters that 25% is too high to acheive a decent return when it's sitting in a bond fund at this stage. REmember, there's that ugly monster out there called inflation which eats about 3% away from your earnings each year. So, if your bond fund pulled in 3% ROI and inflation was 3% that year, you're just even-steven.</p><p></p><p>A good investment portfolio will have a mix of large-cap domestic stocks, small-cap stocks, international stocks, and bonds. Depending on your age, the percentage that you allocate to each will differ. You might want to go 30% S&P500 (domestic large cap), 30% EAFE (International), 30% Russell 2000 (Small cap), and 10% bonds. You might want to think about setting bonds even lower, and allocating each of the other three at 33%.</p><p></p><p>Within the UPS 401K, there's a feature that will rebalance all of your funds every 90 days. Take advantage of it. Basically, this means that the 401K will automatically every 90 days sell your highest performing funds and purchase your lower performing fund so that they are all at that equal percentage again. It sounds counterintuitive to sell your top performers and buy your "dogs", but think of it this way. It's forcing you to "sell high" and "buy low" and it's a great way to get your emotion out of the investment.</p><p></p><p>Look at your 401K at most, once a month. Don't get caught up in the day-to-day management of it. Most of the millionaires next door don't look at their finances more than 10 minutes a day.</p></blockquote><p></p>
[QUOTE="mountaingoat, post: 308274, member: 1250"] You're 22. Assuming that you'll retire at 65, you have 43 years until you need the money. That's a LONG time horizon. Equities (stocks) over time have consistently returned 9-12%. Yes, there are years when it returns less, but you have to look at the long term. As far as what percentage, I would have to agree with all the other posters that 25% is too high to acheive a decent return when it's sitting in a bond fund at this stage. REmember, there's that ugly monster out there called inflation which eats about 3% away from your earnings each year. So, if your bond fund pulled in 3% ROI and inflation was 3% that year, you're just even-steven. A good investment portfolio will have a mix of large-cap domestic stocks, small-cap stocks, international stocks, and bonds. Depending on your age, the percentage that you allocate to each will differ. You might want to go 30% S&P500 (domestic large cap), 30% EAFE (International), 30% Russell 2000 (Small cap), and 10% bonds. You might want to think about setting bonds even lower, and allocating each of the other three at 33%. Within the UPS 401K, there's a feature that will rebalance all of your funds every 90 days. Take advantage of it. Basically, this means that the 401K will automatically every 90 days sell your highest performing funds and purchase your lower performing fund so that they are all at that equal percentage again. It sounds counterintuitive to sell your top performers and buy your "dogs", but think of it this way. It's forcing you to "sell high" and "buy low" and it's a great way to get your emotion out of the investment. Look at your 401K at most, once a month. Don't get caught up in the day-to-day management of it. Most of the millionaires next door don't look at their finances more than 10 minutes a day. [/QUOTE]
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