Aggressive asset allocation in a 401K

Investing is only a small part of generating wealth, but it is an area people fixate on because it can be phrase simply "What should I invent in?" and there's a good bit of fear of doing it wrong.

Recently I was asked about this for a 401K in which the following stock funds were available. I'm skipping the bond fund in the aggressive allocation because I'll use the REIT as an income generation (aka bond) replacement. (Apologies about the big vertical space before the table. Stupid blogger puts in a bunch of line breaks automatically. I've created this blog by editing the HTML, but blogger still adds the spacing.)

Fund	Aggressive	Moderate
Bond Funds
Vanguard Total Bond Mkt Index Inv		15%
Domestic Stock Funds
Ariel Appreciation
Third Avenue Sm-Cap Val	10%	10%
Vanguard 500 Index Fund Inv	30%	40%
Vanguard Growth and Income Inv
Vanguard Mid-Cap Index Fund Inv	10%	10%
Vanguard Small-Cap Growth Index
International Stock Funds
Artisan International Inv
Vanguard Total Int'l Stock Index	40%	25%
Domestic Stock Funds
Vanguard REIT Index Fund Inv	10%

My thoughts:

1. I'm a big fan of international investing. I also don't believe that a diversified international investment poses much greater risk than the US market, especially given the low projected growth of US companies (6-10%).
2. I didn't want to pick more than 5 choices, nor did I want to put less than 10% into any one choice. The portfolios are not that sensitive to small perturbations of the allocation.
3. I like REITs a lot. And more and more people are starting to use them as a standard part of their portfolio.

In my personal 401K for this company, which represents only a fraction of my investments, I chose a fearless pedal to the metal allocation in 2006 of roughly 1/3 REIT, total internation index and the small cap growth index. Two out of three isn't bad.

Introduction

This blog is about money. Investing, saving, spending and giving it away.

The general assumptions are:

1. More money is better, all else being equal. Of course rarely are two options "otherwise equal".
   
2. It's your money, so you get to do what you want.

The title arises from the multitude of demands on your financial resources. To buy or to save. If buy, then so many choices. If save, then so many (often scarier) choices.

Another tyranny is the emotional demands investing your money places on you. To reliably invest well, you need to sift through many choices, make reasonable decisions and then be patient. Very patient. Yet at the same time, you have to monitor how things are going. And you have to continually invest any new money that comes in.

But it always comes down to having money now gives you choices now, wich I summarize via:

"The most valuable dollar is the dollar you've got right now."