Thursday, November 29, 2007

Reevaluating my 401k

My company decided to take their current 401k plan to the next level--bring in a financial firm to help them choose great funds and design portfolios to get the best return for various investment strategies. The firm recommended funds currently in the company's core group be removed and added some better performers to the core funds. There were several meetings to explain these changes and why they were being made. In addition, employees could also meet with one of the financial associates fora 30 minute individual session so I signed up.

I have six funds in my portfolio: a large cap, a mid cap, a small cap, international, government bond and a lifecycle. Some of funds I really did not want to give up to match the aggressive growth portfolio designed by the financial firm--Fidelity Contrafund and Fidelity Overseas fund. Both had been performing well for me and I liked them. The person I consulted with basically recommended I get rid of the bond fund and lifecycle fund. Since my retirement horizon is 30 years, she said a bond fund was not really necessary as its yield is generally less than stocks and only there to tame volatility. Since I want to maximize growth, more stocks, the better. Here is the portfolio I walked into the meeting with:

Selected FundContribution
Fidelity Contrafund (large cap growth)20%
Fidelity Overseas (international)20%
Fidelity Low Price Stock (mid cap blend)20%
Wells Fargo Small Cap Value CL Z20%
Fidelity Freedom 204015%
Fidelity Institutional Short-Intermediate Government5%

As of 11/28/2007, the YTD return was 12.2%.

The woman I spoke with did say I did a good job of covering all the bases. Still, getting better returns and doubling my money sooner is nothing to dismiss. Therefore, I walked out with this more aggressive portfolio:

Selected FundContribution
Fidelity Contrafund (large cap growth) 20%
Allianz NFJ Dividend Value Inst CL (large cap value)10%
Fidelity Overseas (international) 24%
Fidelity Low Price Stock (mid cap blend)20%
Wells Fargo Small Cap Value CL Z16%
Columbia Mid Cap Value Fund Class Z10%

Hopefully, I will get a better return for this new portfolio. I really want to maximize growth of the dollars I put into the 401k. Right now, I contribute 10% of my income to this pretax shelter and my company matches 50 cents on the dollar up to 6%. I have never left this money on the table and never will as long as I work there. I am also contributing to a Roth IRA in an index fund and slowly growing that. Between my 401k and my Roth IRA, I am contributing 16% of my gross income to retirement funds (19% if I include the company match). My goal is 20% into retirement funds in the next five years along with maxing out the Roth IRA contribution.

I want to ensure my comfortable retirement and financial independence. I will take advice I believe is sound to help me on this path and hopefully, end up in a good situation for the future.

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