Hi everyone,

I'm 24 year old who just kicked off fulltime employment in January this year. I have vested 5% of my paycheck into my 401(k) - although my firm doesn't match it for me just yet. I have distributed my 401(k) contribution into 5 different investment options. 3 with stock/equity and 2 with mutual funds.

I have distributed 70% into 3 stock/equity and 30% into 2 funds. I was wondering if my strategy is well stated. I have friends telling me to go more on stock/equity than funds since I get more in return when I retire. Should I go 80/20 on those options?

Also, I'm planning to open a Fidelity Roth IRA and put another 5% there. Do you, financial advisors think this is a good option?

What other personal investment can I do? I'm looking into long-term CDs starting 2009.

Thanks,
Josh

EDIT

Sorry, I for some reason, thought providing the stocks should be confidential, but it totally isn't. Here they are.

1. REREX (Equity/Stock) 2. DODFX (Equity/Stock) 3. Merrill Lynch (Fund Code: 14240, Equity/Stock) 4. GSOIX (Bond/Fixed Income) 5. PTRAX (Bond/Fixed Income)

Does this help? I can provide full names if you want, Thanks!

I am not a financial adviser, but want to encourage you to keep studying, and talking to your friends, but base your decisions on your own research and observations. The 'market' is just too big and diversified for there to be only one way, up or down.
The Roth IRA is a great idea: learn to buy and sell your own securities. There are other brokerages besides Fidelity, so look around. Long-term CDs do not sound productive to me because of inflation. Some brokerages offer tax-free, government bonds which may accomplish your objectives in this area.

Hello jiwonstr. It's great that you are investing a significant amount of your salary today into your 401(k) - not enough 20-somethings are thinking that far ahead. Congratulations!

As to the particular mix you've selected - if I understand you correctly you have picked 5 different investments, but I don't understand what they are. You say 3 are "stock/equity" - for most plans that means mutual funds that invest in stocks. It would help if you could tell us what the funds are - either by name, or better yet ticker symbol, or by description. Are they index funds? Are they concentrated in growth stocks, or in value stocks? Large cap versus small cap? Are any of them focused on international stocks? Then you say you have two "mutual funds" - do you mean bond fonds? Again, let us know a little more about them so we can give your our two cents.

As for the appropriate mix of stocks versus bonds and cash - opinions will vary, so the most important thing is to find a balance that you are comfortable with. You are only 24, so can afford to take a bit more risk than someone who is 54. At your age I would recommend about 80% stocks and 20% bonds. Many people would consider that a bit aggressive, as you stand the risk of seeing your asset balance decline if the market continues to slide. On the other hand, when the market goes higher you will reap the benefits. You really want to pick an asset allocation that feels right for you, then STICK WITH IT CONSISTENTLY FOR YEARS. Don't fall into the trap of shifting the balance based on how the market is doing, because you will miss the gains that come with normal market volatility. For example, if you invest 80/20, and the market for stocks goes down 25% compared to bonds, you will find your asset mix has changed to 75/25. Now when you rebalance back to your 80/20 goal you will automatically be selling bonds and buying stocks at a relative low, so that when the market turns higher you will see the benefit. Too many people make the mistake of selling the stocks after the market has declined, locking in their losses. At your age you can expect to see at least 3 or 4 bear markets and 3 or 4 bull markets before you retire, so keep the faith and stay the course.

The Roth IRA is a good thing to start as well. If you have a hard time funding both the Roth IRA to its max and your 401(k), the rule of thumb is to invest first in the 401(k) to whatever amount your employer matches (typically 6% or so of salary, depending on your company), then fund the Roth IRA, then come back and save whatever else you can in the 401(k). All in all if you manage to save 10% of your salary towards retirement this way you are doing pretty well.