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What are young people doing in their 401ks? Invensting in individual or blended funds? |
I am 27 and still confused about the best way to go about saving for retirement. The future is going to suck for us young folks. The burden is all on us nowadays. Anyway, what are your opinions or what are the YOUNG people doing...all $$$ into blended funds (ie, Fidelity Freedom 2040) or individual funds and diversification (ie, Spartan, Contra, Growth Co, Overseas, etc). And if you are using the one, blended fund, are you happy with the returns? Thanks for the info. You basically have two ways to go - either you can use the "set it and forget it" target date funds or you can "actively" manage your account by picking individual funds and periodically rebalancing. You are young so I'd suggest an asset allocation that is about 80% stock and 20% bond. The stock allocation should contain a portion that is in international stocks. If you want to dabble with a riskier sector fund (i.e., precious metals, real estate, tech, energy, etc.), limit it to no more than 5% of your total account. Depends on if you want to rebalance every year or not. For a hands off approach, then use the blended fund and you will get diversification. If you like a bit more control, then pick a group of diversified funds, bonds, us - large& small cap, overseas- large & small cap and then for some fun take a small portion of your total funds, say 5% and take a chance on a specific industry you think will give you big returns- say wind energy, or biotech ect... But remember to keep this funny money portion small, only up to 5%. this will give you some excitement in your portfolio. With the latter option, you should rebalance your portfolio each year. Your weightings should be based upon your risk tolerance - but in general I would put 20% in bonds, 25% in overseas , 50% in us -and split between large and small in us and overseas, and 5% in the high flier. Hope this gives you some guidelines. |
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