When investing in 401k how much % is wise to go in bonds, small cap, large cap, & international stocks?

Question

Is one riskier than the others?

Answer 1

It depends on your age. The longer you have until retirement, the "riskier" your choices should be. In investment, "risk" usually just means volatility. If you have $1000 you will need next Tuesday, you should put it in a safe place: if you won't need it for 10 years, you can "risk" it in stocks, confident that while it might jump up and down in value from day to day, over that 10 years it will AVERAGE about a 12% a year increase in value.

Google "asset allocation", you will find multiple tools to help you decide the best spread for you based on your age and your level of "fear" of the market.

Answer 2

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Answer 3

It's all about how much risk you're willing to take.

As a general rule, they are considered to be ranked in this order (lowest to highest) in terms of risk: bonds, large cap, small cap, and international.

Personally, I'm hoping to retire in about 20 years and I have about 80% in the most volatile markets I can find (those with the highest risk also have the highest potential for return.) I put 19% in some stable mutual funds and about 1% in bonds (as a last ditch stop gap in the event that all the rest of it goes crazy.)

Not many people have that kind of tolerance for risk, though. I know I've made and lost a couple of fortunes playing these games. That's the nature of the beast.

Answer 4

The allocation should be based on your age and your ability to tolerate risk. Assuming you have 25 to 30 years to retirement and you are willing to take moderate risk the allocation is usually about 60% stocks and 40% fixed income (bonds, cd's money market funds). Many 401k plans offer target allocation (they keep the % allocated to stocks and bonds the same) or target date funds (the gradually shift the allocation away from stocks as you get closer to the target date). These funds usually allocate between large and small us stock and international stock as well as a varity of bonds or money market funds. These would be best for you until you get more experience. You usually can find out your risk tolerance by going to web sites such as money magazine, Vanguard, Fidelity, or T.Rowe Price funds.

All have risk - international and small cap are more risky than large caps and bonds are considered less risky than stocks - the shorter the term of the bond fund the better. Money maket and cd's have almost no risk. But..the purpose of allocating money to all is to spread your risk. Sometimes when stocks are down bonds are up, sometimes when us large cap stocks are down small cap stocks or international stocks are up. so be allocating among all of them it is less likely that everything is down (or up) at the same time. Kind of like the old expression don't put all your eggs in one basket.

I recommend for my daughters about 30% large cap, 10% Small Cap, 15% international and 5% Real Estate stock funds and 40% short term bond funds or money market funds.

Answer 5

#! diversify, #2 read everything you can about what is happening in the world, #3 spend a little (10% or so) in speculation...look for singles and doubles (when you get lucky.) But, hit a grand slam every now and again. Depending on your age, income, expenses, etc. look to take a bit of a risk now and then. If congress passes a law mandating that everyone must drink coffee, what would you look to buy? Use that kind of investigative discipine in your research. Most important, don't be reluctant to take profits. (As Kramer says, hogs get slaughtered.) And, above all, have an exit point/strategy. Don't ride your 'turkeys' to the bottom. Every smart investor has a stop out point. You too need to develop one. Once you have it, use it religiously. Good luck. Believe me, there is money to be made!

Answer 6

Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/c8109

Answer 7

if you live in America right now
put it all in tax free the safest investment.
stock market too uncertain now.

Answer 8

100% in foreign stocks.