Realizing I Can’t Do This Alone: Part II
Posted by mapgirl under 401K, Asset Allocation, Investing, Mutual Funds, Uncategorized
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This is the second part of my realization that I needed professional help with my investing.
In the first part, I wrote about my company’s benefit policy which offers me a 401k plan for retirement and a financial advising service. After my first session, the adviser prepared an investment report for me.
During my second session, the adviser and I walked through his report of my investment holdings. The document was clearly laid out with definitions of different asset classes and an explanation of Monte Carlo simulations illustrating the spread of projected investment returns on my current allocation versus the recommended one. It also had a suggested schedule of periodic transactions of what to sell and what to buy each month so I could meet my target allocation. Ah! This is starting to get good.
The table laid out how many dollars I should move out of large-cap stocks into small-cap stocks, international stocks, bonds and real estate trusts. But how was I going to know what was what? Most of my mutual funds are fairly straight-forward in their asset category. A TIPS bond fund is a bond fund. But an international stock fund might represent only European and Japanese large-cap stocks without a lot of representation of emerging markets in China or Latin America. To capture growth in emerging markets, I had my international funds spread out over a large-cap fund, a broadly indexed fund with large- and small-cap stocks, a China region fund and Latin American region fund.
The next section of the investment report broke out the asset categories of each of my funds for me. I had no idea that one of the domestic stock funds was divided between 80% large-caps and 20% small-caps. I thought it was all large-caps. Looking at this list, I figured out that my best move right now was to sell my holdings in my company stock fund within my 401k and hang onto my ESPP holdings, because the tax implications were less of an immediate issue with an intra-401k reallocation than a taxable account change. In doing this, I moved the money into an international fund because I was weak in that area.
So far so good. I have another session with the advisor at the end of the month. I’ll post about that too. Topic will be insurance.
