Wednesday, January 7, 2009

Just Changed My Future Asset Allocation in My 401k

My 401k is out of allocation due to 2008's market turmoil. Based upon my targets, my 401k should have 80% equity/stock funds, 15% bond fund and 5% Treasury fund.

Instead, it currently looks like:



John C. Bogle, founder of the Vanguard funds, believes investors should rebalance their portfolios on a regular schedule by selling a portion of whatever has gone up the most or buying some of whatever has gone down.

So I've changed my future allocation (as set forth below), in hopes that my 401k will be closer to my target allocations by year end 2009.


Investment Fund (Classification)Current %Target%New %
DODFX (Int'l Multi-Cap Value)16.07%20%24%
DODGX (US Large-Cap Value)17.35%20%15%
BTIIX (S&P500 Index)

18.93%

20%

25%

NBGEX (Small-Cap Blend)

18.50%

20%

24%
PTRAX (Intermediate Term Bond)

21.83%

15%

9%
MLTXX (US Treasury Fund)

7.31%

5%

3%


The biggest loser in 2008 was DODFX,the international fund, with a -47.76% return. Since that's the only decent international fund in my 401k choices, I'm sticking with it and, as a matter of fact, increasing my future allocation.

I'm also somewhat reassured that Morningstar is still giving its vote of confidence to this fund:

Nearly all foreign markets have posted hefty losses this year, and the damage has been severe across the sector and market-cap spectra. That's why every category of overseas-equity offering has lost more than one third of its value for the year to date through Dec. 18, with foreign large-cap funds dropping more than 40%, foreign small/mid-cap offerings shedding approximately half their value, and emerging-markets funds plunging more than 50%.
...
The Team at Dodge & Cox International Stock There's no denying the fact that the Dodge & Cox team, our 2006 winner, has disappointed in 2008's terrible conditions. A number of the team's picks in the financials sector have cratered, and Dodge & Cox International is mired in the foreign large-value category's bottom quartile with a 48% loss. Posting an oversized loss in a major sell-off really stings. But we continue to believe in the team and its fund. The team is exceptionally deep, seasoned, and skilled, and it has produced impressive overall results here. The fact that the team employs a sound value discipline that has also delivered superior long-term results at Dodge & Cox Stock (NASDAQ:DODGX) bolsters our confidence in the future here, as does this fund's low expense ratio.

Although Morningstar is also continuing to give its vote of confidence to DODGX (US large cap value fund) as well, I have other viable alternatives for large-cap US funds. Therefore, I'm reducing my DODGX allocation and increasing my allocation of BTIIX, the S&P500 index fund. My total allocation for large-cap US funds will remain at 40% overall.

How the stock market will behave in 2009 is anyone's guess. All I can do is keep contributing, rebalance my portfolio, cross my fingers and hope for the best.

6 comments:

J. Money said...

Amen sister, all we can do is get it all organnized and pray it turns around this year :)

And i'll agree on the 401k allocation changes every now and then - A GREAT thing to do! and one that people don't like to follow...including me sometimes sadly enough ;)

Sharon Rose said...

Hi there-it sounds like you've done a lot of research, good for you my dear for sorting it out!

Miss M said...

I'm sticking with Dodge and Cox too, they were major losers this year but their long term track record is good. I need to do the same thing, I admit I've never given enough thought to asset allocation. If I had rebalanced at the start of last year I would be in better shape today. My emerging markets fund had a huge run-up and should have been trimmed, instead I let it all crash. Thanks for the reminder.

Shtinkykat said...

J. Money: This is new for me too. Let's see if Mr. Vogle's right!

$haron Rose: Thanks. But uhhhh.. it's more like flying by the seat of my pants.

Miss M: I swear, if I only knew this stuff when I first started my 401k. Let me know how you've reallocated.

patrickl said...

Thank you for sharing this information.
Fidelity 401k

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