Sorry John, looks like we're split on that topic! (But I should add that Manny has a lot more experience than I do.)
I hope one of us is in sync with the article :)
Nellie means I'm a lot older
That's not what I meant, but I kn
ew he would take it that way (he's more knowledgable)
Haha, actually that story covers both sides of the aisle, so you are both good!
So, going back to the rebalancing question, what advice would you give to someone about what percentage of each type of investment they should hold?
Hmmm, the answer to that question really depends on a few factors: time horizon, risk tolerance, for starters. We periodically suggest allocations/funds for specific time horizons in the magazine. The May issue has a Kiplinger 25 story that includes portfolios.
unfortunately, the matter of asset allocation is so geared to each individual's circumstances--especially time horizon (when will you need the money) and personal tolerance for risk and volatility. At a meeting this morning, we also talked about the importance of factoring in the amount of assets you have. Eg, someone with a gazillion dollars doesn't need to have a lot in stocks (or even bonds for that matter). That doesn't mean he or she shouldn't invest, just that it may not be as necessary as someone with a few thousand (or even a few hundred thousand) who's trying to build a nest egg for retirement
Thanks for the link, Nellie.
Just curious: Have any of our readers out there beat the market this year?
There is a benefit--if the 401K offers fantastic funds at institutional expense ratios (translation low annual fees) that you either can't into get on your own because the fund is closed, or you'd have to buy in at a higher-rate fee, then it's better to stay in. I have kept one old 401K open (i.e, I have not rolled it over ) because it gets me access to a particular actively managed fund I like that is closed to new investors--AND i can buy index funds at institutional expense ratios.
So the short answer is, it depends on how good the funds are in the 401K plan offered by your former employer.
So, if the funds aren't that great, rolling the 401K over is going to be advantageous?
If the funds aren't good, rolling the 401K over just means you have a broader breadth of investment products to choose from--stocks, ETFs (both of which are rarely available in 401K plans), as well as a wider choice of mutual funds.
I just checked with our ace personal finance expert Sandy Block. She writes:
I think that last sentence should end "... that you canNOT get in an IRA." Correct?
or am I missing someting?
Think you might have read "than" as "that"?
You definitely need to read our Nov cover story: How to Be a Better Investor. Rebecca, can you post the link?
Not sticking to a detailed asset allocation plan is one mistake. Sticking to a plan means you make decisions based on the plan and not your emotions when the market doesn't go your way
The biggest mistakes, in general, are trying to time the markets (no one can do it consistently well enough to make it a worthwhile effort), trading too much and not paying enough attention to costs. In addition, most investors fall victim to the two primary emotions that drive investing decisions: fear and greed. They buy after an asset category or a stock has run up and they sell after it's fallen, just the opposite of how you would behave in, say, a department store. Never forget one of Warren Buffett's most important statements of his philosophy: "I buy when others are fearful and I sell when others are greedy."
I would never buy a variable annuity for a tax-deferred account. You'd be paying an extra layer of fees for a benefit--tax deferral--that is already provided by the vehicle.
Some VAs promise to keep you whole in case the value of your investments fall but you have to pay even higher fees for that "insurance."
Steve, great question. We'll pass that on to our resident annuities expert Kim Lankford. Perhaps she can answer it in a future column.
Yes, if you have a Roth 401K you can roll it over into a Roth IRA--not additional taxes would be paid.
Thanks for joining, Steve!
It looks like that's about all we have time for today!
A big thank you to Manny and Nelly for chatting with us today!
Thanks for joining us. Happy holidays to all
For even more answers to your personal finance questions, join us next Thursday from 1-3 p.m. for our monthly Jump-Start Your Financial Plan Q&A. See you then!