Looking for some thoughts on my asset allocations

If you have not already, then re-evaluate "maxing" out the

401(k). For most people contributing to the 401(k) to get the match, and then to one's Roth IRA, is a good choice. After this, contributing without matching must be considered carefully in view of 401(k) fund expenses and the fact that, in retirement, one's 401(k) withdrawals are currently taxed at a much higher rate (that is, as ordinary income) compared to an ordinary taxable account (where one pays very low capital gains and dividend taxes, currently).

You need to compute now how much you want to spend on a house. In particular, do you want to put down as much as possible? This is not an easy computation and will depend on one's desires. Whatever amount you want to put into the house should not be in stocks but instead only a money market account, high grade bonds or CDs.

Based on historial returns, your asset allocation looks okay to me, /assuming/ you are using low cost index funds, and perhaps with a little tweaking given the possible imminent home purchase. For more ideas, see the free online asset allocating tools linked via

Ya married? If not, one of the best financial planning choices you can make is finding a woman with the same interests in careful planning as you.

The overall equity allocation looks solid. Are the international equities large caps or small caps? My only comment would be can you invest in a mix of international large and small cap stocks.

As for the relocation/ moving/ house down payment expenses, I would suggest considering those funds outside of this allocation. A house downpayment is temporary (you don't need the cash allocation for this for 30+ years, just long enough to pay for the house). Same with a one time relocation expense.

I think maxing the 401k while you can (while you are young) outweighs long term tax consequences. Getting money saved while it has time to compound will serve you well.

Doesn't it make sense for the OP to include short-term funds as part of the overall portfolio allocation? Then the OP would just rebalance when those funds are consumed. This gives the OP low volatility in the funds he may need soon, and lowers volatility overall, accomplishing both goals at once. Or am I missing something?

-Will

As other authors have suggested:

- long term assets in your 401k and IRA. There really is no reason, at your age, to hold bonds *except* as an alternative to cash, and current yields (inverted yield curve, ie cash interest rate higher than bond interest rates) make this relatively unattractive.

I would fill your 401k with equities although I don't think that is particularly tax efficient. Your asset allocation, for the long run is probably not too far out of whack. You are effectively overweight small and mid cap stocks-- in a downturn, this is likely to hurt (medium and small cap stocks are no longer 'cheap' on a PE basis v. large stocks) so you either might want to go to a total market index fund, or increase the weighting of large cap towards 60%.

Liquid assets outside your tax deferred accounts. This is tax inefficient (capital gains on equities are taxed at a lower rate than interest) but assuming you will be using this to fund the purchase of a home at some point or start your own business, you are going to need that cash in the next 3-4 years.

Thanks for all the advice guys, I appreciate it.

The risk changes once the item being purchased is obtained, therefore cash allocation could decrease once a house is purchased.

The short term need (for a house downpayment) temporarily would skew risk. This is why I suggested cash for the house down payment be outside the typical allocation model for retirement. For example, once the house was purchased with a downpayment of $50,000, then there would be little need for a $50,000 cash position after the purchase of the house.

On average, small and mid caps have become more expensive after their rally in recent years. However, if he chooses the right small cap value fund -he just needs to look at the average P/B or P/E of the fund's stock holdings- he can still find relatively cheap small caps value funds, with a higher-than-average long-term rate of return, as shown by the data. In the long term, that makes a lot of difference.

Right, this makes perfect sense. But it sounds like you're suggesting that the $50,000 should not be counted toward the OP's cash allocation. For example, let's say that the OP determines that he needs a 10% cash allocation and this amounts to $10,000. Should the OP hold only the $50,000 for the downpayment in cash, or should the OP hold $50,000 + $10,000 = $60,000 to satisfy the OP's cash allocation? I would think that just holding the $50,000 and then rebalancing when that $50,000 is consumed would be the right choice. But then I don't allocate this way...

-Will

Do you have any funds you'd recommend? I'm a bit uneducated on how to properly research and compare stocks/mutual funds.

I do not think $50,000 is part of "cash allocation" for a short term need. If someone needs a $10k cash allocation, then another $50k cash for a short term/ immediate need, I would not count the 50k as part of the allocation model.

primary reason- if all assets for retirement are in a 401k/Roth/IRA and the short term cash is in another account type (taxable), I would not want to mix apples with rocks. The need is short term and the 10k being discussed is part of 401k and not the taxable account.

If more retirement assets were in taxable accounts, then the point above holds less merit.

Why do you think OP is overweight in small and mid caps? 50% large cap, 35% mid cap and 15% small cap for an equity allocation looks good to me.

Here's how it breaks down amongst the accounts: Taxable account: 56%

401k: 37% Roth IRA: 7%

======================================= MODERATOR'S COMMENT: Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

What funds/stocks do you currently own (which make up your current allocation)? Are the funds stocks held in taxable accounts or IRA/

401k/ tax advantaged accounts?

What funds/stocks do you currently own (which make up your current allocation)? Are the funds stocks held in taxable accounts or IRA/

401k/ tax advantaged accounts?

for a FEW lines to add context, the previous post is deleted.- Hide quoted text -

My suggestion would be to outline which funds are where. Because some of suggestions made would give tax implications (for anything you sell in a taxable account).

If you use the Yahoo mutual fund screener and look for top-rated small cap value funds with a 5-yr average rate of return of at least 15% (that's about the long-term rate of return of small cap value stocks), you get 5 funds. Some of them may be closed to new investors, though (the last figure is the 5-yr average rate of return of the fund, for instance, 18.9% for DFA U.S. Small Cap Value ):

DFSVX DFA U.S. Small Cap Value Small Value 16 521.13 M 18.90

DFAVX DFA U.S. Small Cap Value II Small Value 15 521.13 M 19.21

FRMCX Franklin MicroCap Value A Small Value 7 237.52 M 17.25

HRTVX Heartland Value Small Value 6 414.95 M

16.50

SCMVX Schneider Small Cap Value Small Value 3 914.89 M 24.31

Available only through financial advisors.

Closed to new investors.

There's a 2% redemption charge, according to Morningstar--but they don't say whether that's always or just for shares held for a short period.

Closed to new investors.

Well, here we go, there's a lot so beware ;)

401k: 20.12% FID DIVERSIFIED INTL 19.68% SPARTAN US EQ INDEX 10.21% FID SM CAP INDEPEND 10.09% JANUS ADV FORTY S 9.78% PNX I SM CAP VAL I 6.81% FIDELITY LOW PR STK 6.71% ALGER MIDCAP GRTH I 6.68% FID VALUE 4.95% FID CONTRAFUND 4.86% FID BLUE CHIP GROWTH 0.13% OPPHMR DEV MKTS Y

IRA: CMGB CHIPOTLE MEXICAN GRILL CRYP CRYPTOLOGIC INC FHKCX Fidelity China Region FLATX Fidelity Latin America FEMKX Fidelity Emerging Markets FFNOX Fidelity Four-in-One Index Fund VTIV INVENTIV HEALTH INC COM

TAXABLE: FCASH Cash EWW ISHARES INC MSCI MEXICO FREE INDEX FD FDFAX FIDELITY SELECT CONSUMER STPLES PORT FDLSX FIDELITY SELECT LEISURE FIEUX FIDELITY EUROPE FIGRX FIDELITY INT'L DISCOVERY FIVFX FIDELITY AGGRESSIVE INTERNATIONAL FLATX FIDELITY LATIN AMERICA FLVCX FIDELITY LEVERAGED COMPANY STOCK FNCMX FIDELITY NASDAQ COMPOSITE INDEX FNMIX FIDELITY NEW MARKETS INCOME FPHAX FIDELITY SELECT PHARMACEUTICAL FSAGX FIDELITY SELECT GOLD FSCOX FIDELITY INTL SMALL CAP OPP FUND FSIIX SPARTAN INTL INDEX INVESTOR CLASS FSMKX SPARTAN 500 INDEX INVESTOR CLASS FSTMX SPRTN TOTAL MKT INDX INVESTOR CLASS PTE POWERSHARES EXCHANGED-TRADED FD TR DYNAMIC TELECOM & WIRELES WFMI WHOLE FOODS MKT INC

Yup, that was alot. 3 stocks and 33 funds? If you owned 36 stocks, well chosen of course, I'd think that was about right. Well chosen would mean they are diversified among many industries as well as large cap/small cap, etc. I can't help but wonder if the funds you have are not overkill, that they overlap enough that many can be eliminated. Wouldn't international overlap with Latin America and China? Isn't Latin America an emerging market, therefore overlapping that fund? I like China. I was in the FXI ETF up 83% last year. And I continue to believe that overseas diversification is good, as does Jeremy Siegel "Stock for the long run" and "The Future for Investors" author. I'd also question including Fidelity Four-in-One Index Fund, it has "approximately 55% in spartan 500 index fund, 15% in spartan extended market index fund, 15% in spartan international index fund, and 15% fidelity U.S. bond index fund." But you already have an index, and international represented. So why this fund? I do understand the inclusion of the health or consumer funds, you feel those sectors will perform. I don't agree or disagree there. I do agree that the sector funds are a good way to approach a sector you feel will outperform. My overall observation is beware the overlap. JOE