After I'm done with
asset allocation for my 401k, I move on to Roth IRA. I decide to max out the its contribution limit ($5,000 for year 2008) as well. Since I'm not limited to pick from a few costly but mediocre performing funds like in the case of my company 401k, and my 401k is really a conservative approach, I can afford to be more aggressive for my Roth IRA. I set the mix target via the following aggressive-conservative-conservative levels:
1st Level |
| Target |
| U.S. Stocks | 50% |
| Foreign Stocks | 40% |
| Bonds/Cash/Others | 10% |
| Total | 100% |
2nd level | Giant/Large | 80% |
| Mid | 20% |
| Small/Micro | 0% |
| Total | 100% |
3nd level_non foreign | Giant/Large | 60% |
| Mid | 20% |
| Small/Micro | 0% |
| Total | 80% |
Like my 401k, when I do my contribution allocation, I will follow the above target in the level-ordering fashion because I think the first level has most dominant power on my portfolio. To avoid things going wild, I have to hedge the risk involved in the second and third level significantly by allowing only 20% exposure to the mid/small caps.
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