401k

I talked to a friend last night (I won't say his name for privacy purposes), but we talked about how to allocate a 401k.  The best way to allocate a 401k is to spread your investments in all allocations.  I allocate my 401k differently because i've done this for several years already and i'm familiar with the changes and trends of the US markets.  But, if you are just getting started it you should start with a different approach.  You should "diversify".  It is written on every book about investing and any financial adviser will tell you the same.  When you diversify, you are spreading your investments on safe and risk accounts.  A typical 401k breaks down like this:

Safer: Money Market Accounts:

Safer with little risk: Bonds, Fixed, Mortgage

Medium: Balanced allocations, Large Caps

High: Small Caps

Higher risk: International, Emerging markets

So, you need to spread them out on all of them.  You will make and loose money, but that's how you start.  You will never make money without loosing.  I had a -2% on one of my accounts YTD one time.  This year i have 20% YTD already on that same account.  I've watched my 401k account since, who knows 2001 i think.  I've seen my account in ups and downs many times.  But no more.  After all this years, i can manage to get positive gains YTD.  Last year, i got around 13% YTD on my 401k.  This year is up 16.5% YTD.  My plan this year is to pull a 30% + if possible on my 401k.  We'll see.  I will post more stuff later and how to do it.  Because, know one will tell you when you should take your money out or put you money in when the US rocks or goes to recession.  Did anyone tell you when to sell your house before the housing market broke down in 2008-2009?   

Let me suggest some stuff to get you started.  I had read them and i recommend them to you.

Real Money by Jim Cramer

5 Waves to Financial Freedom by Ramki Ramakrishnan

Read your 401k allocations and call them.  It's free to talk to your 401k advisers.  

Watch Mad Money

Will post more stuff later.  

401k's and Brokerage Accounts

Well, i'm pretty happy today.  I sold all my ETFs (Exchange Traded Funds) and got a 17% gain in a 2 to 3 weeks period.  Really amazing stuff!

Back in late June, i bought the UPRO, SPXL and TQQQ.  They are 3 times bull S&P ETFs.  This means that if the S&P (and if you read my previous comments about what the S&P stands for) went up 6% in 2 to 3 weeks, you make 3 times of that percentage.  It is one of the riskiest investment strategies out there because if it turns against you, you'll want to pull your hair out and cry.   So, I sold these shares today and got a nice profit of 17%.  Now i'm watching the after market data after Ben Bernanke's speech and the markets are rocking again!  I got so close to stay in but i did sale my shares because you can't get too greedy in this game.  You get too greedy and you can loose some.

Now, let's talk about some of the beauties of investing:  401k and brokerage accounts.

Brokerage accounts: They are your best "checking account" if you are an investor or future investor.  Forget the damn checking accounts and savings accounts at the banks..  They are a bunch of scheme accounts from the banks and other institutions promising a misserable .0001 % rate of return.  Set up an brokerage account!  This is what i can do with my account and just found out a few months ago.  You can put money there, let's say 10k and they'll match 100% if i want to borrow money at a 4% APR to invest!  Is that nice?  How much is a credit card APR's?  15, 20, i heard of 27%.  Now, you can't take that matching 100% to spend but you can take your own cash out, let's say 5k and you will still have 10k all together with the left over 5k + the matching 100% = 10k still invested.

401k:  You get exposure to many allocations:  bonds, mortgage, small caps, large caps, international, Europe, Asia and many more.  If you think China is going to rule the world, you buy International Emerging Markets allocations (see you company's 401k).  If you think US will keep rocking, you buy large and small caps.  Now, one of the best freebies from a 401k is your companies match to your investment contribution per year.  Free money!!  I get a 25% match.  There are other lucky ones with an 100% match.

I'm invested on both brokerage and 401k accounts.  You should give it a try.  They are great tools to have and start as early as possible.  It takes some years to get this stuff.  First strategies are to be diversified in your 401k accounts and playing it safe.  Once you start getting the hang of it, you can try the brokerage accounts.

Oh, and by the way, Virginia 529 sucks.  You can only move your money once a year!!!  The tax incentive is not that great than that of 401ks with the ability of moving your allocations more times per week, or month.    My 401k is with Principal and it let's me buy and sell once per day.  Oh i forget!  If you are a first time home buyer : ) use that honey to buy a house!  Free of tax penalty!  Unless the government changed this rule.   : )

Laters.
P.