Assett Allocation?

I am looking for a good assett allocation strategy. I am a 40 year old man with 2 kids and about 500K to invest, planning to retire in about 25-30 years. I want to invest in several mutual funds, but I am just wondering what percentage of funds we should keep in each fund. I am thinking 35% small cap 30% large cap 10% Cash 15% midcap and 10% bond funds. Any thoughts?

Aside from the usual advice of consulting a financial planner, I would go about 50% large cap, 25% small- and mid-cap, 15% foreign equities, and 10% bonds.

I would be fully invested (almost no cash) because the market is overall pretty favorable right now. I would go heavy on large cap, because they seem less overvalued right now.

I assume you're talking about a retirement account or 401-k? If it's a cash account, you might include a little more cash as a emergency fund, but your bonds could provide a fairly secure source of emergency cash.

Finally, if you have $500k to invest, you might do considerably better investing in equities over mutual funds. With that amount of money to invest, you can get an individual manager whose fees might be less than all the fees you'd end up paying to mutual fund companies.

I think the allocation mix suggested in the reply above is pretty good, except that I would add REITs (real estate) to the mix. REITs have a low correlation to the stock market, so they can help smooth out short term fluctuations in your portfolio, yet your overall return may be better. So 10-20% of your portfolio in a REIT mutual fund or two is a good idea, IMO.

Mutual funds aren't all expensive. As long as you stick to no-load no-transaction-fee funds, the only "fees" will be the fund's management fees (expense ratio), which are typically around 1 to 1.5% of the gains, but some are much lower than that. And some of these fund managers are actually pretty good--might as well take advantage of their expertise! :-)