Hi everyone,

I recently re-distributed my firm's 401(k) plan. They're not matching anything yet, so it's totally my dollars for now. I'm 24 years old, and paid off my college loans just now so I'm investing a lot for my retirement. Here are the summary:

Investing 12% on pre-tax 401(k). Total of 9 different options, 6 being equity/stock, a bond, money market/stable, and allocation fund (T. Rowe 2050).

Of 6 equity/stock, 1 large cap, 2 mid caps, 2 foreign/EM, and 1 small cap. And they eat up total of 65%. My T.Rowe is the biggest contribution with 25% of every deposit I make.

Bond & Money Market makes up the rest at 10%.

Do you think I have diversified correctly? I have heard that T.Rowe retirement fund is great and I am vesting the most on that one since it's got great reputation.

Your advice/comments will be very much appreciated. I'm also going to open up a Roth IRA soon too. Hopefully I'm on the right track to retire rich.

You didn't tell us the percentages in each of the 6 equity funds - please do so. The split between large cap, mid cap and foreign is an essential part of managing allocation.

Also - can you tell us how the TRP allocation fund is invested - what percent in bonds versus stocks?

My first reaction is that you have two many funds. Why two mid-cap funds? And what areas areas of the world are the two foreign funds invested? Allocation funds are great, especially for people who don't want to be bothered making their own decisions about investment allocation. But if you are willing to manage your own allocations, and if the specific funds that you have available in the plan are good ones, you may be better off without the allocation fund. For one thing - allocation funds are essentially a "fund of funds" that is a hodgepodge of a lot of funds thrown togther, including some under-performing funds. Also, there is often an extra layer of fees piled on - each of the underlying funds has its own 12b-1 fees, and then the allocation fund adds its fees on top of that.

One other comment - with 10% in bonds, plus whatever the portion of bonds is in the TRP fund (probably around 30%), that means you're total allocation in bonds is probably around 18%. Not too bad, especially for a 24-year old, but be aware that it's a pretty aggressive mix. You may want to consider shifting a bit more to bonds for added stability - maybe a total of 30%.

Hi ebaines,

6 equity/stocks: 1 large cap (10%), two mid caps (8%, 10%), a small cap (17%), two foreign (8%, 12%)

One of foreign is invested in emerging market, and other is growing companies all over the world (includes US).

One midcap is invested in S&P400 and other is Russell Midcap index (with 80% in US and 20% in foreign securities). So I have two midcaps.

I'm not sure of t.rowe's distribution, knowing the year is 2050, it's probably hefty on equity/stock and low on bonds. That's my guess.

What do you think now? Still too aggressive?

You are way over-eeighted on small and mid-cap stocks versus large cap. I would recommend a mix that's more like 2/3 large cap and 1/3 small & mid, whereas you have less than 1/4 in large cap and more than 3/4 in small & mid cap. And again, I would increase the bond portion to 25% or so - higher if you are the type who can't sleep well at night if your account shows a big loss.