New 401(K)

[larryeis]

Hey,
I'm unsure of where to invest my money regarding my 401k.
I am 26 years old. My company matches 50 cents on every dollar.
Here is my possible investment list.

INVESCO Stable Value Trust
SSgA Bond Market Index Fund
Dreyfus LifeTime Income Portfolio - Investor Shares
Dreyfus LifeTime Growth and Income Portfolio - Investor Shares
Dreyfus LifeTime Growth Portfolio - Investor Shares
SSgA S&P® 500 Index Fund
Davis New York Venture Fund - Class A
MFS Massachusetts Investors Growth Stock Fund - Class A
Putnam Voyager Fund - Class A
Franklin Small-Mid Cap Growth Fund - Class A
AIM Dynamics Fund - Investor Class
Putnam International Equity Fund - Class A
AllianceBernstein Global Technology Fund - Class A

thanks in advance,
larry

[jIM_Ohio]

Are the loads waived for the class A shares?

[Tim, Ohio]

You should look at the 10 year performance of each fund
and select based on that. You will want to be semi-aggressive
about your selections since you are so young. Focus mostly
on equally distributing your contribution in the following:

small cap growth, large cap growth and finally global.


When you reach your 40's you will want to start shifting some
to the money market fixed part and some bond fund for a little
security through diversification. Your account will see losses and
gains.

[Broken Arrow]

Originally Posted by Tim, Ohio

You should look at the 10 year performance of each fund

Welcome Tim.

I'd hate to be a Doubting Dan for someone's entrance, but there's an old but reliable saw that goes like this, "Past performance does not guarantee future performance".

What happened 10 years ago is exactly that. To use that as a basis for your expected future performance is likely to be an exercise in disappointment.

The rest of the advice, I can agree with. Welcome aboard.

[Snave]

I think Tim's point may have been more along the lines that it is better to look at a longer history than a recent 1 year of stellar growth with 10 years of weak returns. While I agree that past performance is not indicative of future success, it is a smarter way to go than 9 bad years of performance with a good one in the last 12 months.

[Broken Arrow]

Originally Posted by Snave

I think Tim's point may have been more along the lines that it is better to look at a longer history than a recent 1 year of stellar growth with 10 years of weak returns. While I agree that past performance is not indicative of future success, it is a smarter way to go than 9 bad years of performance with a good one in the last 12 months.

Hmm, yes I can go along with that... although if we are to examine an actively-managed fund's performance, I think it's more important to look at it in relation with the fund manager's tenure and the turnover ratio.

For example-- and I'm just arbitrarily selecting a fund on the list here-- let's take a look at Putnam Voyager A (PVOYX). As you can see there, it's managed by 2 fund managers who... just started in January 31, 2008! Um, yikes, I wasn't expecting it to be that early. But anyways, can you see how the past performance may not be indicative of future performance, no matter how far you go back? Because how the fund has performed wasn't the result of the current managers.

Plus, the fund has a very typical turnover ratio of 65%, which means that within less than 2 years, the entire portfolio could change completely! So, the performance hinges even more so on the abilites of these two green fund managers.

So, while the saying may be well-worn, it does have some merit, "Buy the fund manager, not the fund."

Either that, or we can simply be good passive investors and set a properly-diversified portfolio based on our own risk tolerance and target horizon. Oh, and to avoid loads and high ERs whenever possible.