Monday, March 26, 2012

Retirement diversification thoughts and plans

I took advantage of a quiet weekend to deal with Life Stuff - taxes and filing, and also I finally made myself sit down and take a clear look at my retirement accounts. 

I've long understood it's important to diversify investments. And I've made stabs at it, but the pure truth is I have no idea what I'm doing. I had questions like: if I've got 21% of my investments in a large-cap fund, and another 20% in a broad market index.. is that basically 41% in the same segment of the market? I kinda think so, but I don't KNOW.

I decided I was going to rebalance yesterday - which implies A Plan, so I also knew I was going to come up with some sort of plan.One plan I'd come across recommended:
25% 500 fund; 25% Small-Cap; 25% International; 25% Bond  

25% in bonds seemed too high given my age, and since I don't own a home I thought I ought to invest in real estate using a vehicle called a REIT. Oh, and I had a bunch of mid-cap stocks for some reason... so that plan is a good starting point but didn't really fit my situation.

So now I have a plan. I admit I settled on it pretty arbitrarily, which on the one hand isn't so great, but heck, it's a plan. I'm taking some comfort from that. Here it is:

Large cap/broad market: 40%
Small cap: 10% 
International: 25%  
Bond: 15%
Reit: 10%

To achieve something close  to that percentage split I closed my mid-cap fund and added that money to my international and bond funds; I also transferred money from my small-cap into bonds. The Fidelity site (which is my work-sponsored plan) made it pretty easy to do all this once I decided what I wanted to do.

My monthly retirement contributions are with Fidelity, and I don't have access to a REIT there, so I've split the investments among broad market/small cap/international/bond. I'll have to rebalance regularly to keep the REIT where I want it to be, but I think I can do it annually and call it good.

Oh and I still have a broad market index fund I have to roll over - from a job I left nearly 6 years ago - but I did figure its balance into my percentages above. I'll just have to move it from broad market where it is, to a broad market at Vanguard, and call it good. One of these days...!

So is this so-called plan of mine total crap?


  1. This comment has been removed by a blog administrator.

  2. I like my midcap. I have all three, plus a few index funds, and I use Morningstar to help me evaluate to make sure I'm not too heavily invested in any one sector.