Van Kampen Investments
May 21st, 2010
Question: 401K question … (see details)?
This is all new to me, just looking for opinions/advice. I’m 32, so I’ve got 30 + years before I retire … my investment profile is moderate. I have it set up as follows:
INVESCO 500 INDEX TRUST – 20%
INVESCO STABLE VALUE TRUST – 40%
AMERICAN GROWTH FUND OF AMERICA – 20%
PIMCO TOTAL RETURN ADMIN. – 20 %
Six other funds to choose from:
AMERICAN FUNDS AMERICAN BALANCED A
AMERICAN FUNDS EUROSPECIFIC GR A
COLUMBIAN ACORN A
DREYFUS PREMIER SMALL CAP VALUE A
VAN KAMPEN GROWTH AND INCOME A
BALDOR ELECTRIC STOCK – SHARE ACCOUNTING (I’m employed with Baldor Electric).
Just looking for advice on which funds and which percentages to choose, thank you for help.
Answer: So first you have to identify which asset classes the various funds tap into:
-Invesco 500 is almost exactly correlated to the S&P500 index (the market–which has returned appx 10% over the last years annually)
-The Stable Value is basically a money market fund (like investing in a bank’s CD–about 4-5% annual return)
-Growth fund of America is a large-cap growth fund
-The Pimco one is an intermediate-term bond fund
-American Funds Balanced is basically a large-cap fund
-The Europacific one is a large-cap blend of foreign companies
- Columbian acorn is a mid-cap growth fund
-Dreyfus is a small-cap value
-Van Kampen is a large-cap value
Now it depends on what type of return you are looking versus the associated risk. For example, someone who wants to invest very conservatively will invest mostly in money markets and a little in large cap value stocks (or a market index). For those more aggressive, they may pursue more investment into stocks and even a portion of funds dedicated to growth stocks and foreign investment. Given the fact that you have 30 or more years until retirement, you have the affordability to be more aggressive and “risky” in your decisions.
Currently, you are invested very conservatively given the options. You have 40% in a “savings account”, 20% in bonds, and 40% in mostly large-cap companies (a company is mostly classified as small, mid, and large capitalization–referring to size..250million to 1billion is small, 1bil to 10bil is mid, and >10bil is large).
You want to be more allocated to growth and Foreign Investments. I would personally recommend the following weighting: 25% Invesco 500, 25% Stable Value, 25% Europacific, and 25% Dreyfus. This will give you some stability with having 50% of your money mostly domestic with exposure to the growth of smaller companies in the Dreyfus fund and Invesco. You will have a constant growth in the Stable Value fund of about 4-5% for that allocation. And you will have solid exposure to foreign companies in the Europacific fund. *** I might, for the following 1-2 years, overweight the Europacific fund because although domestic growth is slowing, international growth is strong and should continue that way.
Science – Van Kampen Investments
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