How should I diversify my 401k?

Question

My company allows me to choose how much of my 401k money is allocated to the following funds:

Aim Funds High Yield Fund (HYINX)
Loan Fund (LOAN)
Scudder Growth & Income Fund (SCDGX)
Vanguard Index 500 Fund (VFINX)
Wells Fargo Emerging Markets (MFFAX)
Westwood Balanced Fund (WEBAX)
Westwood Equity Fund (WESWX)
Leggette & Company Stock (LAC)
Columbia Intermediate Bond (SRBFX)
First Eagle Overseas Fund (SGOVX)
Founders Growth Fund (FRGRX)
Loomis Sayles Bond Fund (LSB1Z)
Ml International Value I (MAIVX)
Neuberger Berman Genesis Fund (NBGNX)
Old Mutual Emerging Growth Fund (OBEHX)
Schwab Institutional Cash Fund (SWIXX)

I'm 22 years old, so I have quite some time before I plan to retire. I understand that I should choose an aggressive mix, but how do I know what's "aggressive?"

What percentages would you recommend choosing for each fund?

I'd really appreciate both general guidelines and specific recommendations...

Answer 1

Ok, anything cash or bonds you don't want because you are so young. You want a large percentage (about 40-60%) in large cap stocks. They are the largest and most stable companies. You want about 20-30% in mid and small cap domestic stocks, and 10-20% in international stocks. MAKE SURE TO GET YOUR COMPANY TO PUT IN THE MAX MATCH, IF THEY MATCH. So if they will match you dollar for dollar up to 4%, put in 4% NO LESS. That is essentially free money.

I would go with:

50% VFINX (large cap)
20% SGOVX or MFFAX (or you could split it, these are international)
30% NBGNX (small cap)

If you want you can put some in a bond fund or company stock, but I would say no more than 10% in either. please keep in mind these are only suggestions for a balanced portfolio. There are a lot of large cap choices here (especially growth) but the S&P 500 will get you the 500 largest US companies, with BOTH growth and value components.

Answer 2

Ask for some brochures on these choices. These would give you some statistics on previous performance. Might even rate each option as to risk or aggression.

Split your contribution between 4 funds. You can change it later if you don't get the returns you want.

Answer 3

Read this article by Jonathan Clements of the Wall Street Journal. He completely answers your question.

http://www.amexsux.com/cgi-bin/yabb/YaBB.cgi?num=1119185052