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Question:


What strategies would you recommend for picking investments in my 401(k)?
-JanaS


Answer:


It’s hard to answer your question without knowing what choices your employer offers, how old you are, what your tolerance for risk is and what other investments you own. The conventional wisdom among investment pros is that your percentage allocation to bonds should equal your age, so if you’re 38, you should keep 38 percent of your 401(k) portfolio in bonds (or, more likely, bond mutual funds) and the rest in stocks, split maybe two-thirds in domestic companies and one-third in emerging and other foreign markets. If you’re of a nervous disposition about your investments – and not just now, when everyone is on edge – then you might prefer to keep less in stocks and more in bonds.
 
Whatever asset mix you choose, you should make sure to stick to it by rebalancing your holdings every six months or a year, assuming your employer permits it. If you decide that 60 percent stocks and 40 percent bonds is right for you and the stock market has fallen so much that the mix has gone to 50-50 – not hard to imagine these days – then you would fill out the relevant form with the plan administrator to have the allocation adjusted to 60-40 again by reducing the amount you have in bond funds and adding to your stock funds.
-Conrad de Aenlle



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