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  #1  
Unread 02-20-2010, 01:15 PM
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digink digink is offline
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Default 401(k) help

Hey guys,

So I recently graduated from college and landed a job, needless to say it is my first real job and I don't have even the slightest clue about 401ks and what no (Computer science degree so not really big on the finance stuff).

Anyways within my 401k with my employer it allows you to select percentages of how to allocate your funds, and I was just wondering if anyone could help me with setting it up or even pointing to resources which kind of break it down to how you should have it set up etc.

Currently I just have most of my money in stable value fund but I've heard since I am young I should take higher risks and try to reap the higher returns.

Any help would be appreciated.
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  #2  
Unread 02-20-2010, 02:11 PM
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I am not a USA resident so I do not have even close to a clue to how it works out there.

I do know that high risk is always bad when your talking about retirement or long-term savings. High risk is good for an amount of money that you are comfortable with losing should things go wrong, it should never be the basis for a retirement plan.
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  #3  
Unread 02-20-2010, 04:09 PM
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The younger you are the more risk you should (and need) to take. A rule of thumb used by many financial experts in deciding what percentage of a portfolio should be in stocks is to use 110 minus your age.

So if one is 20 years old, roughly 90% of their portfolio should be in stocks. And never invest in single stocks or in the company for which you work. You carry too much risk doing that. Instead, invest in no-load (free of fees) mutual funds and indexed mutual funds.

Dave Ramsey is a great financial resource, as is the blog getrichslowly.org

Hope this helps.
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  #4  
Unread 02-20-2010, 04:46 PM
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Quote:
Originally Posted by digink View Post
So I recently graduated from college and landed a job, needless to say it is my first real job and I don't have even the slightest clue about 401ks and what no (Computer science degree so not really big on the finance stuff).
Asking for financial help on a fitness forum is just the same as going to an accountant's forum and asking them to tell you the best way to lose weight and get in shape.

I'd suggest asking around for some recommendations to a certified financial planner in your area. There are a lot of planners who specialize in working with recent college grads and people who are new to the idea of financial planning and long term investing. Meet with that person and develop a plan - 1 yr/5 yr/10 yr/etc.

You'll get far better advice than what you'll find here.
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Unread 02-20-2010, 05:07 PM
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Asking for financial help on a fitness forum is just the same as going to an accountant's forum and asking them to tell you the best way to lose weight and get in shape.
Not really. Most people on an accountant's forum are professional accountants. Most people on forums like this are not "fitness professionals". Most are fitness "hobbyists". There is a vast range of knowledge and expertise in places like this. I've been in fitness groups that had an amazing number of PhDs in diverse fields. Makes the off topic discussions very interesting, and informative.
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  #6  
Unread 02-20-2010, 05:54 PM
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Quote:
Originally Posted by digink View Post
Hey guys,

So I recently graduated from college and landed a job, needless to say it is my first real job and I don't have even the slightest clue about 401ks and what no (Computer science degree so not really big on the finance stuff).

Anyways within my 401k with my employer it allows you to select percentages of how to allocate your funds, and I was just wondering if anyone could help me with setting it up or even pointing to resources which kind of break it down to how you should have it set up etc.

Currently I just have most of my money in stable value fund but I've heard since I am young I should take higher risks and try to reap the higher returns.

Any help would be appreciated.
By far the most important thing you can do is put the maximum amount in as possible. Whatever they allow you to put in, do it all.

Of far lesser importance is where you put your money in the 401k. The MOST IMPORTANT thing is to get it in there. There are ways for you to get the money out if push comes to shove but there is no way to get more money in and the tax shelter your 401k provides is the best thing available.

Without knowing exactly what your choices are it is difficult to advise you but I would steer away from proprietary funds or anything with high fees. Example if it is a prudential 401k avoid prudential options. Not that they are always bad but there are typically better choices. Fees are what the mutual fund investment company charges to manage the money and over time this can make a big difference.

Bottom line for anyone under 40 who does not plan to retire for at least 10 years I would reccomend 100% in stock funds.

If you really want to get serious about saving you should also look into a ROTH IRA in addition to your 401k at work.

Investing is like fitness. With a little bit of research you can become a relative expert (know more than your relatives). Much like fitness the fundamentals are FAR more important than the details but people like to fixate on the details but if you got the fundamentals wrong the details don't matter.
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  #7  
Unread 02-20-2010, 07:37 PM
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Quote:
Originally Posted by JMo87 View Post
The younger you are the more risk you should (and need) to take. A rule of thumb used by many financial experts in deciding what percentage of a portfolio should be in stocks is to use 110 minus your age.

So if one is 20 years old, roughly 90% of their portfolio should be in stocks. And never invest in single stocks or in the company for which you work. You carry too much risk doing that. Instead, invest in no-load (free of fees) mutual funds and indexed mutual funds.

Dave Ramsey is a great financial resource, as is the blog getrichslowly.org

Hope this helps.

That seems pretty reasonable. I might even roll w/ say 5-10% risk free assets, i.e. a bond fund that invests in US treasuries...5-10%...possibly even 15% in a fund that invests in corporate bonds, and probably some munis. So you'll look for stuff on your list that has something like that in the name.

For what you have left....I'm a bit conservative but maybe divide it in thirds. 1/3 blue chip value fund, maybe even a dividend fun (I think blackrock or somebody like that has one)....1/3 emerging market stocks. Think brazil and japan. 1/3 Small cap US equities.

Maybe take a small percentage off the top, like 3-5% and get a bit more "risky"...invest in a commodity fund or the gold etf to get some commodity exposure.

Those last three paragraphs are just off the top of my head...the point being less than 25% should be in fixed income....out of the rest most of it in "riskier" equities (and by riskier I mean growth)....I'm partial to emerging markets...and the rest blue chip, stable equities. I'd suggest getting a few opinions.

The best thing you can do is get a good financial advisor, when you start wanting to really put some money away. Look for somebody that knows how to balance your risk....as you get older you want more fixed income and less equities....but don't go with anybody that tries to overload you on any one thing, be it equities, bonds, or even a particular fund family.

I am not a licensed financial advisor, so I'm not 'allowed' to give investment advice....I'm a member of the Chicago Mercantile Exchange, I trade short term bonds, outright and spread, before that I traded S&P500 and Nasdaq index futures.
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  #8  
Unread 02-20-2010, 07:57 PM
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Sorry I didn't provide what options I have as far as investment, here is a screen shot.

sorry its kinda small but these are my options:


'
JMO I'll def. look into that site and Dave Ramesy, thanks. And thanks for all the replies.
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  #9  
Unread 02-21-2010, 01:02 AM
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One thing I can tell in reference to choosing where to put your 401(k) money - per the Motley Fool, 80% of mutual funds underperform the S&P 500 (which is a good representation of the overall market). Thus, putting your money on an S&P 500 Index fund will do better than most mutual funds. Highly recommend putting a good chunk at least on S&P 500 - as someone said, you're young and can afford more risk, so you may want to do something riskier with the other portion...
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  #10  
Unread 02-21-2010, 11:57 AM
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Originally Posted by Zoso View Post
One thing I can tell in reference to choosing where to put your 401(k) money - per the Motley Fool, 80% of mutual funds underperform the S&P 500 (which is a good representation of the overall market). Thus, putting your money on an S&P 500 Index fund will do better than most mutual funds. Highly recommend putting a good chunk at least on S&P 500 - as someone said, you're young and can afford more risk, so you may want to do something riskier with the other portion...
I agree. While I'm not familiar with the Motley Fool's method of investing, it's true that over the long term, something like 80-90%+ of managed funds fail to outperform index funds like the S&P 500. After you factor in all the fees that come with managed funds, your actual returns are always greater with a no load index fund.
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