i am looking for advice on changing my 401k?

Question

while my company stock is high (ticker: peg) i want to change to another fund. i am breaking the rule of all my eggs in one basket(100%) in stock. it was a good gamble that payed off. but i dont think it will hold at the price it is trading at. a few examples of what i can switch to are: small, mid, and large cap equity; conservative, moderate, and aggressive portfolio,; along with bond and international funds. i am 44 years old. ty

Answer 1

Carol,
First does you company have a pension plan, where when you retire you will get a fixed payment every month (given you meet specific rules) or a lump sum payment. I would venture to guess given your age and if you have worked there very long it does. The reason I ask is that if it does, it will be heavily invested in Bonds, so do not buy any bond fund. Bonds are important but you have plenty.

Given your age, I would recommed about a 30, 30, 30, 10 mix. I would put 30% large cap, 30% in mid cap and 30% in small cap and 10% in International. If you wanted you could make it 25% in all.

Conservative and Moderate portfolios generally puts too much in bonds for any one only 44 years of age. I like making the choices so I don't like the terms Conservative, Moderate and Aggressive. Generally Aggressive still put too much in Large Cap stock. Small caps have more volatility, but in the long term (and 15 to 20 years is long term), small and mid caps have historically done better.

Now as you move closer to 55 to 60 move the percentage to more large caps and mid cap, but never move below 10% International and 10% small cap. And don't worry about any bonds until you retire, as long as you have the pension waiting for you.

International is good because more than 50% of the companies are located outside the US. Good companies like Shell, Phillips Electronic, Toyota, SAP and on and on.

I should have said, you could keep 5 to 10% in PEG, so do a 20, 20, 20, 15, 5. PEG pays 3% dividends and has had good appreciation over the last 2 years. Its P/E is getting a little high for a utility, but not out of proportion. Because of changes in tax laws a few years ago, dividnend paying companies have been in favor in the market. Anytime there is uncertainity in the market, they hold pretty well.

Answer 2

You are on target... diversify !
As for exactly what to put your money into...it's hard to say not knowing exactly what funds are available ( or who manages the plan)
You are not OLD yet ( in the investment world)... so, as another person mentioned) you won't need much in bonds at all.... and you can certainly go with a moderate allocation for your " core" holding ( 50%-60%)....
...other things to consider...small-caps have been a terrific addition to any portfolio for at least three-four years, get something into them....the same with anything global/ international..the rest of the world is growing ( at rates that can really help your returns)
One other area I love in long- term sense is real estate REITS...some plans have a RE fund ( usually invested in commercial/income/hotels/malls) a real steady income performer ( if available)
Good luck... I'm sure you'll do well...just keep your eye on things every six weeks/ three months.....and never be afraid to move things here and there......it's YOUR money ...make it work for you! ( ...and somewhere down the road..markets go bad ..THEN defend your gains by going more conservative/bonds.)
P.S. Seeing as you were in a HOT stock for a while, you may have to get used to seeing smaller returns for some time...but, it's for the best.....and anything mid to high teens ( percentage-wise) for the next twenty years will surely take you to the " promised land".

Answer 3

Congrats on re-balancing! It's very important to do so regularly.

1. You need to pick funds with the lowest fees possible. If you have access to index funds in your 401k, pick them! Otherwise choose the funds with the lowest fees available that most closely mimic index funds (broad diversification).

2. You need a balance of bonds, US stocks, and international stocks. It may be easiest and best to just pick the "aggressive" portfolio if it offers all those components--and assuming you have 15-20 years to retirement. "Moderate" is probably too conservative for you based on your age--you need at least 80% in stocks. (Alternatively you can do half "aggressive" and half "moderate" if one seems to aggressive and one too conservative).

3. If your pre-set portfolio mixes don't have bonds or international, or if they have much higher fees than your other choices, then make your own portfolio out of the other investment choices. Put 10-15% in bonds, 20-30% in international, and the rest in a broadly diversified US stock fund (or pick one large cap and one small cap fund).

Answer 4

Get a lifetime/lifestyle/target fund that will do the work for you. As you grow older, the new money will be used to buy more bonds than stocks. Right now anything under 6% is a loss in worth once you factor in inflation and taxes. Anything offering 6-7% is a hold on worth. Anything over 7% is a gain in worth.

Answer 5

I am not going to tell you what to do.

But diversification is a good idea.

I love indexing and am looking into those newer target funds
i.e Retirement 2035 or 2040 etc etc etc.

Having your retirement in the company you work for stock is flirting with disaster, can I get and amen Enron from the masses?