What's a good Asset Allocation for this situation?

Question

I'm in my 20's, with plenty of time until retirement. I've already decided that I'm going to have 100% equities for now (no bonds or cash). However, I'm not sure how to divide my contributions up among the various mutual fund options. Here are my choices:

-Vanguard Institutional Index Fund (VINIX, S&P 500 Index fund)
-T. Rowe Price Blue Chip Growth Fund (TRBCX, Large-cap
Growth fund)
-Vanguard Developed Market Index Fund (VDMIX, Foreign Blend
fund)
-Vanguard Extended Market Index Fund (VEXAX, Mid/Small-Cap
Blend fund)
-AllianceBernstein Value Fund (ABVIX, Large-cap value fund)
-Goldman Sachs Structured Small-Cap Equity Fund (GCSIX,
Small-cap blend fund.
-Barclays Global Investors Int'l Active Fund (Can't find the
ticker symbol)

I'm no expert, but I'm not too high on the ABVIX or GCSIX funds. They seem young and unproven. I couldn't find any info at all on the Barclays fund.

How would you experts distribute my contributions among those funds, and why?

Answer 1

I am in the same situation. Mid 20's and a long time to retirement. I don't know the specifics of the funds, but allocation accounts for 90% of your returns. And I returned almost 17% last year. (No promises about the future, however). I like an aggressive stance when it comes to equities, so I do the following...very simple:

30% Large cap
30% Mid/Small cap
20% International (espcially emerging markets)
10% Balanced
10% Alternative

I think the first three are in your list. I like balanced funds (split between equities and bonds) since it gives me a little anchor and lowers my standard deviation. Also, I like alternative investments in certain situations (kind of like play money) such as real estate, venture capital, or some other ultra-risky fund. Hope this helps.

Answer 2

I'm assuming that you've chosen these funds because they are the ones provided by your 401K.

No one has a crystal ball and can accurately predict what will happen in the markets 10 years from now. Were it me -- and I'm a trader, not an investor -- I would place equal amounts in each fund. I have always felt that money management is the key to successful trading and investing. In my opinion, this option is the only intelligent way to manage accounts for the future when one cannot possibly know what the future holds. To do anything else, is to manage according to today's markets and that is better done by a trader rather than an investor.

Answer 3

Well, the key long-term is being spread over most of the markets ( diversity)...so you either go heavy with the " index" and a little " international." Or create your own " index" with VEXAX and the TRBCX, but still add about 20% in either the " global" or " foreign blend"..( the rest of the world is " working,too)