Calamos Investments
May 12th, 2010
Question: Which of these should be in my 401k?
I’m in my early twenties, and looking to get myself ready for a comfortable retirement early with my company’s 401k. Which of the following Options should I put money into, and what percentages would you suggest?
Laudus Int’l MarketMasters (Int’l Large-Cap Growth)
Calamos Growth A (Mid-Cap Growth)
Victory Diversified Stock A (Large-Cap Blend)
Vanguard 500 (S&P 500 Index)
Sound Shore (Large-Cap Value)
FPA Crescent Portolio (Moderate Allocation/Balanced)
PIMCO Real Return D (Gov’t Bonds)
Gartmore-Morely Stable Value Fund (Cash/Stable Value)
If you’re not familiar with these specific funds, could you at least suggest what percentage of my contributions should go to each type of investment (Growth, Value, Index, etc.)?
Answer: As the former leader of this country might say, define comfortable. Your key advantage is that you have several years’ head start on your goal, regardless of what you consider a comfortable lifestyle to be. If you play your cards right, you can be a multi-millionaire by the time you are 60 or 70. With that said, I join the entrant who suggested you consider a total plan, to include a Roth IRA. It is unfortunate that the catalog of funds in your 401(k) are substandard. That’s not to say that you will not do well with them. I am suggesting that you build a total retirement plan to include other investment vehicles. Your tolerance for risk should not be of importance (over the next 3-5 years) while you learn to invest from experience. Assuming your monthly contributions will be small to start, I recommend a simple allocation percentage of 60/40 in the Laudus International Fund and Vanguard 500 Index Fund. Between these two vehicles, you will be extremely diversified. Additionally, you will learn more from these two markets if you study them for 12 months or longer.
Please don’t make the mistake of allocating contributions to a large number of funds. The effect will be like swimming with your street clothes on. Accumulating wealth will probably not be difficult for you; but it won’t be automatic either. Hint: assign an annual percentage gain to your account, e.g., 15%. Then, monitor the performance every 3 months to see if you are on track. Make adjustments (using the same two funds, if feasible) if you need to.
It was ok to ask your question an open forum such as this one. However, you should get personalized advice, over time. Best wishes.
Hawk
Calamos Investments
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