What the Hell Should I Do With My 401K?

I plan on retiring in about 20 years. My investments are allocated as “aggressive growth” at the moment, however since I’m 45ish, am I supposed to have all my equity in one basket of stocks? Should I do about 30% bonds/fixed income? Do I choose a fund that mirrors this? I’m so jealous of that S&P 500 low index fund clone that has made what is close to double, and will it continue to do so? Especially considering we have experienced a 9 year bull run. It’s not like I’m going to retire tomorrow and need it if there is a recession coming, right? So I’m thinking I should move it into an S&P 500 index fund. What are folks thinking is a good asset allocation for a 20 year time horizon? There are so many competing schools of thought out there.

There is the subtract your age from 90 and that is how much you should be in stocks, therefore as you get older you have less in stocks and more in bonds. So theoretically when I am 80, I would only have 10% left in stocks because I do not have time to survive a market dip. But who knows, what if people live to 120, that would be another 30 years of growth! There is also the Ray Dalio Hedge Fund Billionaire “All Weather Portfolio.” He says the average investor has a portfolio built to do well in good times and bad in bad times. But, he points out that the bad times come, therefore we should have an “All Weather Portfolio”. We all know it rains sometimes. The prescribed asset allocation is comprised of 30% stocks, 40% long term US bonds, 15% intermediate US bonds, 7.5% commodities and 7.5% gold. ¬†Interesting stuff to work out, I am still contemplating the whole gold thing.

What other schools of thought are out there? The allocation is also a personal decision based on one’s stomach for risks and time horizon. Some folks say be all in stocks if you can ride out the waves. At the end of the day we all need to take into account what experts say, our personality and specific situation. Only then can we find the right balance for our particular situation.

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