thoughts on 401K growth vs. equity?

[34TheTruth34]

My 401K (Merril Lynch) has been set at 40% growth, 30% international, and 30% equity. I am 28 years old. I have left it this way since it started, but recently I've been thinking that this is not aggressive enough.

Here is the way it is now:

Growth (40%)

-MFS Emerging Growth
-Van Kampen Emerging Growth fund

International (30%)

-AIM International Growth

Equity (30%)

-Mass. Investors Trust


Here are my choices by category and their performances in the last year--5 yrs--10 years:

Capital Preservation:
-ML Retirement Reserves Money Fund 3.7--1.9--3.6

Growth:
-ML Fundamental Growth Fund 10.7--61--7.9
-ML Global Fund CL 36--9.3--NA
-MFS Emerging Growth 9.4--(2.4)--2.7
-Van Kampen Emerging Growth Fund 7.5--(3.3)--6.9
-ML International Value Fund ClassI 27--11--9.4

Equity:
-Mass Investors Trust 8.7--1.4--6.6

Value:
-Davis NY Venture Fund 12--6.1--11.2

Asset Allocation:
-ML Global Allocation Fund CL 16--11--1.4

Income:
-ML Bond Fund Core Bond Portfolio (.97)--4.8--5.5

Growth & Income:
-Merrill Lynch Balanced Capital 8--3.8--6.4

International:
-AIM International Growth 27--9--7

Any thoughts or opinions anyone has would be greatly appreciated. Should I change or leave it alone? Thanks.

[buffett]

1. Merrill Lynch is a lot more expensive than, say, Vanguard. I'm sure most of these funds come with loads, and the expense ratios are probably much higher than what you'd get with, say, Vanguard.

2. 12 funds is way too many. Diversification is important up to a certain point, after which it's all overkill. You're way past that point.

3. If you know me, then you know that I ascribe to the "value" camp known as Graham-and-Doddsville. There's only one fund you listed in that camp, and it has the highest 10 year return of all of them.

4. You should probably read a lot more, or at least enough until you understand that "growth" is a subset of "equity."

5. Like most investors who don't really understand what they're doing, you would probably be well served to read some of Scott Burns' old articles and see how/why The Couch Potato portfolio (2 funds) [or Margarita portfolio, if you want to get wild and crazy (3 funds)] would definitely be easier to implement and would probably get better long-term returns than this thing with 12 funds.

[34TheTruth34]

Thanks for the response! I musk ask, though: did you read the original post?

[buffett]

Yeah, I read it, but apparently too quickly. Sorry about that.

I thought "my choices are" meant "these are the 12 funds I have selected to implement my strategy." Now I see that those are the 12 funds you have to choose from, and you chose 4 of those 12.

I must be having a bad day.

Can I have another shot at responding? Here goes.... put 100% into the Davis Fund.

I'm assuming you'll have other investments besides just this 401(k), so you can invest in other things outside of this.

Normally I tell all my friends to just put all of their 401(k) money into an S&P 500 index fund (or something similar). But since Davis is one of the very few people who can beat the S&P over the long term, I'd say just give him the money.

[34TheTruth34]

No problem, don't worry about it. Who is Davis and why are you so high on that fund? Can you provide a link to something I can read about him?

Also, regarding your growth being a subset of equity argument, that may be true, but this is the way they list it on my statements, so that is the way I listed it here.

So, at least to them, they are 2 different categories. I only mention it because they list some different samples of Conservative/Moderate/Aggressive models in which they reccommend a certain % of growth and a certain % of equity.

Thanks for your time.

[buffett]

[ QUOTE ]
Who is Davis and why are you so high on that fund? Can you provide a link to something I can read about him?

[/ QUOTE ]
The current month's SmartMoney magazine lists him as one of five (along with Warren Buffett, Bill Miller, Dave Dreman, and John Neff) "World's Greatest Investors." It's a pretty good article, but there's lots more you could find on him and his company.

I respect the heck out of Charlie Munger, vice chairman of Berkshire, and--irascible fellow that he is--he has very little respect for most of the 6 billion humans on this planet. But he thinks quite highly of Chris Davis.

[34TheTruth34]

I took your advice (well, for the most part). I decided to go with 50% the Davis fund and 50% ML International Value Fund. I would just feel odd with all of my 401K in just one fund, so I split it up and chose the growth fund with the highest 10yr average. Is this a good level of aggressiveness for a 28-year-old?

[maxtower]

Those two should do fine. You'll want to be exposed to overseas investments anyway.
Check in once a year and rebalance to 50%/50%. This will keep you buying more when prices are low relative to the other. For example, if you check in 1 year from now and your Davis is 60% and your Inter.Val. is 40% of your total assets, sell 1/6th of the Davis and buy Inter.Val.

[ChromePony]

Hi, sorry to hijack here but I just signed up for a company 401k through Vanguard where they offer a target retirement fund by year 2035 2040 etc...I'm just wondering if there's any reason I shouldn't just put everything in there, it might have a slightly higher expense ration but it seems worth it for all the management you get. Or maybe 80% there and 20% international funds, thoughts?

For the record I do have some other non 401k funds with Vanguard so I could always handle further diverisfication through that.

[ChromePony]

To follow up my own question here's the current breakdown of the 2045 retirement fund holdings (I'm 22).


1 Vanguard Total Stock Market Index Fund 71.9%
2 Vanguard European Stock Index Fund 10.8%
3 Vanguard Total Bond Market Index Fund 9.8%
4 Vanguard Pacific Stock Index Fund 5.1%
5 Vanguard Emerging Markets Stock Index Fund 2.4%
Total — 100.0%

Looks like they take care of the international side of things and the expense ratio is only .21%, seems like a winner to me but Im still interested in other input.