Originally Posted by
aznxk3vi17
From what I gather, since I know nothing at this point, but should also take action right now, I'll watch the S&P and if things look good, start moving it immediately into my L 2050 fund. Since I'm young and willing to take some risks, but not completely knowledgeable, how does a 75% L 2050, 10% C, 10% S, and 5% I allocation sound? Or, should I just go all in to my L fund?
You got it, kinda...
If it were me, I would dump 100% in the L2040 today. Watch the S&P500 for a correction. If it corrects (say -10%) move it all to the L2050 fund. If it doesn't you still have lots of equity holdings (C/S/I) that will make you mullah. That way you are 'In The Market' if things don't correct, but have some cash/bond holdings (a greater percentage of the L2040 is in G/F) that will give you a little 'alpha' if the market corrects and rebounds.
That would be a very basic 'trading' strategy to get you started.
By the way, waiting for a correction while sitting 100% in the 'G Fund' requires extensive skill or luck. What if your correction mark (let us say you believed a -20% was in the making) never happened. Well, heck, it just did. No 20% correction since March 9, 2009. You would have lost on about a 110% gain or so. You can actually see how dumb thinking like that is by looking at my AutoTracker records over the years. This year I suck because I have been waiting around with too much G/F for that elusive correction. It must be a week away
My advice to a 29 year old... Play the 2040 to 2050 swing till you get your feet wet. You will make bank because you will never be 'Out of the Market'. Save the bonds (F) and cash (G) for old farts like me, the smart market timers, and the dumb market timers. Make your bank early and get the captain/driver for your boat/motor home.
Oh, by the way, mixing L funds and equity funds is not a good idea. The only time I have done that is for setting up lots of '<1%' IFT moves. All it does is add complexity. I would bet that your friend cannot even tell you what the asset allocations are after setting up the one you are talking about. If you want an all equity allocation at your age I might recommend:
G: 0% - At your age does a 2% return look like a boiling over pot of gold.
F: 0% - This pig is toppy and waiting for the FED to pull the trigger
C: 40% - Your stable fund
S: 30% - Your 'alpha' fund
I: 30% - Seen our Congress/President lately
Average Annual Return: 7% after inflation
Average Annual Risk: 11%
Thus, one could expect a normal return (67% of the time) to be from -4% through +18%
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