Re-Mix My 401k Asset Allocation
I used to be a large cap funds lover. In recent years, I started to see the benefits of investing in some aggressive categories such as small cap and International. As a result, I put more than 40% of my retirement money in these two categories. And I plan on putting more money in International fund. The reason? It’s actually pretty intuitive: the world economy is a lot bigger than US. It seems riskier because we are not familiar with their economic systems. If you look at the biggest 100 companies worldwide, only 33 are US based companies. A lot of our favorite companies are foreign brands such as money blogger’s beloved ING Group, a company of Dutch origin that started selling online saving accounts in US in the 90’s.
If you look at my asset allocation table, I current have about 19% holdings in International fund and I plan on expanding this portion of the pie to 30% by selling the US Large cap. By the way, “Mutual Fund Window” is a program offered by my employer to invest in any funds outside of our normal 401K offerings. In my case, I chose Dog & Cox’s Stock Fund, which has closed its door to the investors in 2004.
I still plan on keeping 25% in bond funds, mainly in inflation protected bond fund to fight the inflation. Large cap currently has quite a bit of Index and Value. I tend to keep 15% of that and move the rest to International. I will keep my small cap at 25% range with Real Estate and Small Value. Since my Roth IRA is mainly focused on Growth fund, to balance out, I left the Growth category out of my 401K mix. More money will be moved to Dog & Cox Stock Fund to keep its 10% balance.
When to do this and how to do it are tricky questions since I try not to touch my retirement too frequently. But once in a few years, I re-mix the pie a bit. I will have to find a good timing to sell high and buy low.
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