Investment Portfolio Recommendations for a 26 year old?

Question

I'm 26 years old and just started working on building my portfolio. I'm planning on maxing out my Roth IRA contribution for 2006 and am going to contribute 10-15% of my 2007 paycheck towards my employers 401k plan.

For the Roth IRA I'm thinking about investing in NAESX. Is this a good idea or are there others that you would recommend?

More importantly, how should I allocate my 401k? Are there specific mutual funds that you would recommend? I want to be pretty aggressive since I probably won't be touching the money for over 30 years but I also want to make sure I stay diversified.

Answer 1

In your 401k (and any investment/fund), a really important consideration is fees. If fees are 1.5% (typical in some load funds), that means you're only getting 6.5%/yr if the fund manages to return 8%--that adds up enormously over the years.

By far the best thing you can put in your 401k--or IRA--is a broadly diversified group of index funds--or one fund that is comprised of several index funds (target retirement funds are great for this). The lower fees make the funds worth it, PLUS they actually outperform the more expensive managed mutual funds on average.

I recommend 60% total US stock market index; 30% total international stock index; 10% total bond market index. You could even do 60/40 with the stocks and leave out bonds altogether for a few decades. Put 10% in a REIT index if that's an option in one of your accounts. The return will be great b/c the high dividends (which will not be taxed!), plus real estate is almost surely going up over the next 30 years.

Answer 2

Your NAESX pick for your IRA is a good choice for a long term investment ... I mean if you're going to put your faith in someone for years and years who better than the small businesses of America? ( I looked at their holdings: nice mix , little real estate..nice avg returns, too.) I'm sure they have a manager that changes with the times, you'll be fine.
The 401 all depends on who manages your plan. Most outfits have similar options, so let's just say start with a " core" fund or two...35% in a "balanced" fund ( stocks and bonds..but a low percentage of bonds because of your age) and maybe 35% in a " blended" fund ( large and mid..to go with the small- caps....most of the large will pay divs and you can't underestimate that when going looooonnnng term)
You can find something interesting for the other 30%.... go a little international, or see if they have real estate or health-care funds,(also great over years)
Keep an eye on things either on-line or with the quarterly reports...don't panic with fluctuations, but don't hold a slacker forever... move things around ( 18 months..2 years).... get above 10%...high teens in the good years...you'll be so happy some day.

Answer 3

With that much time untill retirement you can afford a little more risk than the standard mutual fund. Try investing some money in prosper.com. High returns.

Answer 4

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Answer 5

Aside from the drug suggestion, the above recommendations are good for your traditional options. As you are young and may have investable assets beyond your tax qualified plans, you may wish to look into nontraditional investment options to round out your plan. Discuss your options with a qualified financial advisor.

Answer 6

i would invest in fidelity freedom funds......assets are automatically allocated, aggressive to begin,then more conservative as time passes, to protect your earnings.

if you want to invest and leave it, its a simple solution, and very small fees.

Answer 7

I would invest heavily in narcotics. Buy low, sell high.