My 401K........how much to invest yearly?

[Special K]

Originally posted by: LegendKiller

Originally posted by: Special K

Originally posted by: LegendKiller

Originally posted by: Special K

Originally posted by: LegendKiller
Personally, I put in 15.5k/yr + 50% employer matching. I am 100% stocks and will be until I am 10 yrs from retirement, then I'll step down ~5% per year. It's stupid to invest in bonds, they are a portfolio drag on long-term investing. I am a complete buy/hold guy unless I see a major drop coming, I get out of equities, move into stable investments, then rebuy after what I think is the bottom. It's worked pretty well for me over the last 7 years, averaging a 15% annual net return.

People forget that as long as you can buy and hold and not worry about crashes you can wait out any temporary economic cycle. Time is a diversification technique that works as a perfect compliment to diversification itself. I have yet to see a solid unrefuted study that shows that over a 30 year period a portfolio of stocks/bonds is better than straight stocks. I have only seen evidence to the contrary.

That link that alrocky posted makes it seem as though combining 20% bonds with 80% stocks leads to lower drops when the market is down (compared to 100% stocks) with only a very slight drop in returns:

link

I'm not saying it's correct, just another example of how much conflicting advice there is out there

Naturally you're going to lose less during a down market, as your bonds provide solid footing for a portfolio. However, who gives a crap? I don't look at my 401k weekly and say "OMG, I JUST LOST $500! QUICK, RUN TO BONDS!"

Over the long run, once you consider *all* aspects of returns, including waiting out all economic cycles, stocks will always return higher returns. Beta is a function of short-term volatility of a stock compared to the market. Unsystematic risk is reduced through diversification, leaving systematic risk. That risk is eliminated through long-term inter-cyclical investing.

I don't know one guy I work with who is long bonds in their normal portfolio unless they see a large market correction on the horizon.

Do you have any tips or advice for asset class breakdown, i.e. percentage of large value, large growth, small value, etc? Do you prefer index funds or actively managed funds?

It depends on your familiarization of investment decisions, what your risk level is, how much time you have...etc.

I'm personally more of an index fund guy, with some mutual funds mixed in and a little bit of "play" funds so I can pick individual securities, short, or use option strategies. Within my different funds, I am a contrarian value investor, thus I seek out companies that aren't as hot at the moment. I am lightly weighted in growth, more heavily weighted in international and emerging market. I haven't done my annual rebalancing yet (I do it in Nov) and I don't have my sheet with me, but my tough breakdown is this...

30% value
20% internation/EM
15% Mid-cap
15% small-cap
10% growth
10% large-cap

So on your categories of mid-cap, small-cap, and large-cap, are those value or growth? Similarly, are your categories of value and growth made up of small, mid or large cap companies (or a mix)?

 

[Special K]

Bump - hey LegendKiller, if you happen to read this thread, could you reply to my question in the post above this one?

thanks