How to Allocate Your 401(k) Plan
To build a diversified portfolio you need to have Large Cap, Mid Cap, Small Cap, International, and Bonds in your portfolio. Ideally, you would further split your Large, Mid, and Small allocations into Growth and Value. You would also carve out a small part of your International for Emerging Markets. You only need one solid bond fund. So, in order to be able to build a complete diversified portfolio in your 401(k) plan you need 9 specific types of funds:
- Large Cap Growth
- Large Cap Value
- Mid Cap Growth
- Mid Cap Value
- Small Cap Growth
- Small Cap Value
- International
- Emerging Markets
- Bonds
Go check your plan and I'll bet you dollars to donuts you don't have all of these choices. If you do have all of these choices I'll be you again that you don't have much choice inside each choice. Most 401(k) plans have way too many Large Cap funds and way too few of the others.
