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Msg  71 of 633  at  8/13/2006 4:37:41 PM  by

Andys Alley


401K

<< What is the best mix of investment options in the Lockheed salaried 401K? Looking to be diversified, currently heavy LM.>>

What a great question!  Most people never take the time to look at their 401K... I can't answer your question for perfect diversification (I don't think anyone could without knowing a little bit more about your), but I can give you some thoughts to consider.

You say that you are currently "heavy LM".  This statement alone says that you recognize that you have a problem.  It doesn't matter if you hold 5% of your 401K in LM, or 95%.  The fact that you are concerned is a clear indicator that you need to shuffle your balances.

Let me start by giving you an idea of where I am (so you can understand the perspective from which my recommendations is based).  I am going to be 43 years old next month, so I have some room to play with on the calendar.  My investment strategy can be easily defined as "very aggressive".

I hold five funds in my basic 401K, plus the ESOP.  This accounts for about 25% of my overall 401K ; the other ~75% is held in the self managed account where I can buy and sell stocks or invest in other funds outside of the basic 401K fund offerings.

Within the basic 401K, I keep a relatively equal spread across the following:
  • Broad Market Bond Index Fund
  • Investment Co of America
  • Small/Mid Cap Index Eq Fund
  • New Perspective Fund
  • MSCI EAFE Indexed Equity
  • ESOP Fund
Overall, these funds do exceptionally well in a climbing market (which I don't believe we are in right now - take a look at my post on General Market Analysis for my thoughts on that).  I suspect that there is some overlap between these funds, but I've not looked at them regularly to see what individual positions they might hold.  I have noted that there are multiple indicies that they are supposed to track.

Within my SMA, I am almost entirely in cash.  I have about 7-8%  of that account in CSSGX ( The CANSLIM fund which should track the Investor's Business Daily growth investing method - Morningstar has additional info on  the  fund which was established by Duncan-Hurst). 

Once the market turns around, I will be using my SMA to invest in individual stocks again - excluding the past few months, I've had an average return of a little better than 3.5% per month (that's over 40% annualized, but I've gone through some training in addition to my own learning), which only shows that if one wants to be an active investor, they can make a lot of money.  If our SMA allowed simple option trades like covered calls, there are several stocks that I would still be holding and profiting from.

To summarize - if you feel like you are too heavily invested in LMT (or any other position for that matter), you are.  Take a look at the options available and move some funds from the position that you are too heavily weighted... you don't have to move them all if you don't want to -  there's nothing wrong with taking profit off the table.  You also need to look at  how far you are from your expected retirement date (as well as how often you want to look at your portfolio) to help decide how aggressive or conservative that you will be comfortable with.

I hope all of this helps!

AA




 
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