Should I diversify and/or add to my 401k?

[Daniel Magix]

I was recently looking over my fund choices in my 401k, and I was wondering if I should diversify my portfolio more. I was also wondering if I should put more into the 401k, or if I am ok where I am at...

Here is a brief financial situation description, if it helps:
30 years old, married, 2 young kids.
Own a home, both my vehicles and student loan are paid off, no real debt other than 3k on a 0% rewards card. I have maybe $5k or so available through a variety cds, stocks, savings accounts, etc.

Here are the fund choices in my account...

Fidelity Advisor Balanced T (FAIGX) - $17.72
Fidelity Advisor Dividend Growth T (FDGTX) - $14.20
Fidelity Advisor Equity Growth T (FAEGX) - $59.16
Fidelity Advisor Equity Income T (FEIRX) - $31.88
Fidelity Advisor Government Income T (FVITX) - $9.95
Fidelity Advisor Growth Opportunities T (FAGOX) - $39.35
Fidelity Advisor Intermediate Bond T (FTBRX) - $10.67
Fidelity Advisor Mid Cap Ii T (FITIX) - $18.34
Fidelity Advisor Overseas T (FAERX) - $25.48
Fidelity Advisor Small Cap T (FSCTX) - $24.84
Fidelity Advisor Strategic Income T (FSIAX) - $11.58
Fidelity Prime Fund; Daily Money Class (FDAXX) - $1.00

Right now, I put in 4% (which is the max that my company will match), and I have it split 50/50 between Fidelity Advisor Growth Opportunities and Fidelity Advisor Small Cap. I believe these are the two most aggressive funds of all my options. I have had these funds for a year, since I started at my current job. I chose the more aggressive funds, because I am relatively young and thought I could ride out the potential volatility of the funds.

But now I am just wondering if I should diversify a bit. Maybe choose a lower yield, steadier earning fund? Or maybe my aggressive fund options are still ok? Just wanted some opinions.

And what about the amount I am putting into it? Should I hold off on adding more, and concentrate on building a bigger liquid savings than my meager $5k? I think maxing the 401k up to the company match is pretty standard, right?

[punkass]

Contributing the % that your company will match the minimum you should do, so you are there. I would try to increase your liquid savings, ideally to 3-6 months of expenses, in case you lose your job, or for emergencies.

You should be more diversified. You should have Large Cap and Small Cap funds, and you should have growth and value funds. You should have international funds. And at your young but not really young age, you should have a little bond exposure.

I would think about putting some money in a ROTH IRA as well.

[maxtower]

It wouldn't be a bad idea to save more for emergencies. Figure out how much you would need to live for 6 months if you lost your job and that should be a nice cushion. I keep mine in a 5% savings account. Don't give up any company match to do this though.

Further diversification in your 401k would also be a good idea. I don't really know anything about these specific funds. Are they actively managed or based on an index? You might want to mix in something foreign. Dividend Growth and Equity Income also sound interesting. [img]/images/graemlins/smile.gif[/img]

After you have saved up your emergency fund, you should consider contributing more to your 401k. I don't know how much you make, but if its a standard salary job ( < 100k), I would want to save more than 4% + 4% company match. The more you save while you're young the more powerful your compounding will be.

[Daniel Magix]

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I would try to increase your liquid savings, ideally to 3-6 months of expenses, in case you lose your job, or for emergencies.

[/ QUOTE ]

Yup, I am working on this. Just one year ago today, I had $9k in student loans, credit card, and HELOC debt, and only about $1k in any emergency liquid accounts. Today my balance on the high interest credit cards, the student loan, and the HELOC - is ZERO! and I have built the liquid emergency fund (HSBC for me) up substantially too. But I do want to get my HSBC acocunt up to about 8k or more, to feel safe. I guess that's what I was asking, when I asked about the amount I put into the 401k - should I put less in for now, while I build my emergency fund, or leave the 4% to take the free money from work? But that question was pretty much answered, thanks.

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I would think about putting some money in a ROTH IRA as well.

[/ QUOTE ]

Yeah, I've been researching this lately, and after I build my emergency fund, the Roth IRA will probably be my next investment.

Thanks for the feedback.

[Badger]

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[ QUOTE ]
I would try to increase your liquid savings, ideally to 3-6 months of expenses, in case you lose your job, or for emergencies.

[/ QUOTE ]
Yup, I am working on this. Just one year ago today, I had $9k in student loans, credit card, and HELOC debt, and only about $1k in any emergency liquid accounts. Today my balance on the high interest credit cards, the student loan, and the HELOC - is ZERO! and I have built the liquid emergency fund (HSBC for me) up substantially too. But I do want to get my HSBC acocunt up to about 8k or more, to feel safe. I guess that's what I was asking, when I asked about the amount I put into the 401k - should I put less in for now, while I build my emergency fund, or leave the 4% to take the free money from work? But that question was pretty much answered, thanks.
[ QUOTE ]
I would think about putting some money in a ROTH IRA as well.

[/ QUOTE ]
Yeah, I've been researching this lately, and after I build my emergency fund, the Roth IRA will probably be my next investment.
Thanks for the feedback.

[/ QUOTE ]
Big congrats on being debt free. If I were you I would make your Roth IRA be your emergency fund. Pick something stable to invest in. In case of emergency you can pull out the money you have put in but not the profits.

When I got out of college and started working my first priority was getting $4k in a Roth, then I ramped up my 401k (it wasn't getting matched right away when I started working) and then I began saving 6 months cash to have on hand.

[punkass]

Yea, absolutely don't go lower than 4% since you'll be leaving 100% return on the table.

It sounds like you are doing very well getting out of debt. Congratulations. The fact that you are researching puts you leaps and bounds above the majority.

[kyleb]

Way to get out of debt, man. Feels good, I'm sure! (I still have student loans that I'm intentionally not paying off - it's the right decision, but it's annoying nonetheless...)

Definitely check out a Roth IRA and Vanguard's funds.