quote:

Originally posted by muzzleloader:
Rogue, are you old enough to need some bond exposure in the overall portfolio?

I'm still 20+ years from retirement. I have some bonds within my IRA as part of a Target Date fund, but bonds represent a single digit percentage in my overall investment portfolio. I don't plan on adding any more at this time, and the bond options within this 401k are minimal anyway. My percentage of bonds will eventually increase on its own over time within that TD's glide path, and I can manually lean more towards bonds as needed once I get closer to retirement age.

2+ years to retirement here. Sounds like you have a good plan you can live with.
Three books I recommend to friends who show interest:
The Bogleheads guide to investing
Common sense on mutual funds
and A random walk down Wall Street
Regards, Kyle

Index funds with majority in the S&P500 and anything more than .05 expenses on any index is criminal in my opinion. My apologies to pro money managers and active managed funds but unless you are managing for a very specific reason or short period of time and unless you are cherry picking a very narrow band of time unmanaged indexes almost always beat active. It gets worse over significant chunks of years. Especially If you have 10-20 years or more before you can draw o it for retirement. Just my opinion

With the caveat that right now is a treacherous time for the markets, a well diversified portfolio would include large, mid, and small cap funds, further broken down into growth and value for each level. So, 6 funds to cover those bases. Adding in a tech or international might be desired. Being in only one index might be a rocket ship up today, but it could become a sinking boulder tomorrow.

Lots of research has been done back-testing various portfolios, and something like the above is a winner over time. Something in the 60/40 or 70/30 mix of stocks to bonds has an excellent track record.

As far as bonds go, bond funds are not imho a good choice compared to outright owning bonds. Bonds are like any other investment, meaning they are a gamble that can go up or down. If one is not comfortable with bonds (they seem like an odd duck at first), just remember that they are a thing that can change in value.

Bond funds own a bunch of different bonds, which are each varying in value day to day. Some up, some down. When the masses of people decide to switch from bonds to stocks, they sell their shares in the fund, and the fund then needs to sell some bonds. The value of the bonds is going down, so those who stay in are losing money!

That is the important thing to know, that your bond fund can lose money especially when people are bailing out into the stock market (like what happened a couple of years ago).

If you own a bond all the way to its maturity date, you absolutely 100% will get the face value (assuming the entity has not gone bankrupt). It is easy to buy bonds of any duration. My choice right now are federal government T-Bills of 3, 6, and 12 month duration. There's no way I would tie up my money for more than a year at today's returns. Anyhow, I am guaranteed to get my money when they mature, with a guaranteed return.

If your 401k offers a self-directed option (which may have an annual fee involved) then you can invest in almost any normal basic product. Buying government bonds directly via your brokerage company into your 401k with maturity timelines of your choosing is easy and with little or no fees.

If you don't have a total stock option, then you can approximate a total market using the following allocations:

S&P 500: 75 - 85%
Mid-Cap: 10 - 15%
Small Cap: 5 - 10%

I would say just maintain your chosen allocation for an investment horizon 10 years or greater; that is: if your retirement is still 10 years away or more. If the market takes a downturn tomorrow, the money that is there will rebound back in no more than 10 years and you'll be continuing to contribute at lower share prices.

I would skip the international stock index because you have international exposure through the S&P 500 as these companies have international business.

As you get inside 10 years, you will need to spend some oversight for the money you'll be using inside of 10 years. You can look at target sectors and/or allocation a portion to bonds. Money you'll need for the 10th year gets 10% bonds and increase by 10% the shorter the time horizon.

quote:

Originally posted by Fly-Sig:
If your 401k offers a self-directed option (which may have an annual fee involved) then you can invest in almost any normal basic product.

It does not.