Thoughts on 401K Asset Allocation

**balaoko** Sat Oct 29, 2005 11:23 pm

Thanks blast for sharing your precious ideas. I also have some idea about money management but don't know whether it is reasonable:

As we think about 401k, IRA and individual stock account, we may wonder how much to put in each account with our limited money. Here is my considerations:

In traditional IRA, we can invest stocks at our will and enjoy the tax deduction benefit. It is quite reasonable to put as much money as possible each year in the account and follow blast's portfolio. since blast's model gains very much each year, I hope it will continue the performance in the future, one can also consider a roth IRA instead of traditional IRA.

In 401k plan, we usually have no choice but some funds, and funds' behavior is apparently far beyond as good as blast's model. The only benefit is that it is tax deductable. so we can choose some funds like index based funds or value based funds. This is typically a passive investment, which is also good as we can enjoy the tax benefits.
In my opinion, we can put as much as possible to take advantage of the tax benefit.

If we have more money left, we might put it in our individual account and follow blast's model. since blast prefer long term investment, we can pay less tax compared with short term trading.

BTW, graham pointed out that one should put at least 25% of money in bonds, and blast does not do it in his portfolio, one may buy some bond funds in his 401k plan. I guess this is the best way to follow both graham and blast simultaneously.

**bzsmile** Mon Oct 31, 2005 1:39 pm

What a great post by balaoko!

I've been trying to decide where to park my wife/my own retirement funds, and my daughter's ESA fund. At first I thought I should invest in some index fund, or some fund targeted for retirement (e.g. Vanguard VTTHX, VTIVX). Vanguard is a great choice for its low/no transaction fee on Mutual Funds (although it charges some account maintainance fee at the beginning).

Then I came across balaoko's post, and I thought "hey, that sounds like fun to invest in blast's portfolio without having to worry about tax!" So now I guess I will go with Scottrade, which is cheaper for stock trading.

Thanks balaoko :lol: !

**balaoko** Mon Oct 31, 2005 1:52 pm

You are very welcome. I just put my personal thoughts here. One should decide his own arrangement, as blast pointed out :)

bzsmile wrote: What a great post by balaoko!

Thanks balaoko :lol: !