From Target Funds to My Own Master of Financial Asset Allocation!

I have a Target Retirement Fund at work which I’d normally not stay in, but the fees are low and I agreed with the concept. The idea is that you just “forget” about your investment allocation worries, and the amount in each area changes over time as you age. Nice idea, right? But I started putting all my new contributions into a S&P 500 Fund for the past 6 months because I thought it was light on equities. Then I read an article that said “You either believe in the target retirement fund” concept or not.” And by having other investments in the same 401K, I’m basically saying that I trust the fund manager–but I really don’t. So with that I decided to leave my Target Retirement Fund, not for the fees, but for the freedom to do the decision making on my own. I replaced it with a set of funds that would reflect my risk tolerance and my bullishness on various asset classes and sectors. In the Target Retirement Fund I’m going to retire at 65, and put 80% Equities, and 20% Bonds. I was actually a bit more conservative and went with:

  • 30% Bond Fund
  • 10% Real Estate
  • 30% Equities (S&P 500 Index)
  • 30% More Equities via a Blue Chip Growth Fund that made around 27% and compares itself to the Russell 1000 Benchmark.

This is not my entire portfolio, but it is a nice chunk and it ups my bond holdings TOTAL asset allocation to a higher bond % than I had prior (19%). And I look at the REITs in the real estate section as sort of a “bond-like”. I’m really excited about the Blue Chip Growth fund, and I think for a 27% again, I’m willing to sacrifice a 0.45% expense ratio.

What investment strategies are you using to diversify your assets?

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