Friday, February 22, 2008

Asset Allocation for My Roth IRA

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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