Awesome; thank you, Lord Xar.
Here is what you wrote as to your total portfolio allocation:
55% cash/liquid
25% physical silver / gold
20% 401k ( 97% which are stocks )
--> 40% large cap
--> ~31% international
--> ~26% small cap
Here is how CaptLou invests his wealth:
401K's are tough because you are limited to what you can pick. Best option is usually to spread it as wide as you can. At your age you have plenty of years left.
Overall, I always chose a mix for investments:
25% stocks (broadly invested, index funds are good for this)
25% bonds (again broadly invested)
25% precious metals and/or commodities
25% cash (i.e. money market accounts, CD's, etc)
At the end of every year, I would balance it out; sell off whatever performed well and buy more of whatever was down that year. Truth be told though, I became wealthy from buying income producing assets throughout my life: real estate and businesses. My guess is that if my wife and I worked regular jobs our whole life and just saved for retirement using the above formula, we would be OK now, but not able to live life like we do presently.
Here is what I recommend:
25% stocks
25% bonds
25% gold
25% cash
As you can see, we're both recommending the same strategy (with some tactical variation).
*note: I understand I shouldn't "rely" on internet advice. I've been reading a bit lately and its touch going. I program for a living and it seems ALOT easier than understanding the nuances of finance!!
You are a programmer, and thus probably have a logical and disciplined mind. I would strongly,
strongly recommend you check out Harry Browne's Permanent Portfolio strategy. It is logical. It is brilliant. It cuts through about a hundred layers of gook and confusion and gets to the truth.
16 Golden Rules of Investing
One-Page Summary of the Permanent Portfolio
If someone is trying to be your broker or to sell you on investment advice,
make them apply for the job. Ask them to send you their tax returns for the past five years showing their gains and losses in their investments. Then, if they have has a better return than you, you might consider taking their advice. But they
won't send it, because they
haven't done better, because their ideas are all failed and lousy. They're following a disproved paradigm.
The truly rich usually invest conservatively. They do not chase yield. They understand the impossibility of beating the market. It is mathematically impossible to do so reliably.
So, I recommend for the money that's precious to you that you invest it safely in the 4X25 split discussed above so that it will be protected no matter what happens. There's a lot of different ways to do that. But that is the overall goal for a safe and balanced portfolio.
Right now, your 401k represents only 20% of your total portfolio. What complicates the matter is that that could change --
will change if you continue putting money into it. So consider the future. I would ask your company's financial person about the possibility of a brokerage window. Many 401ks have this option, but very few people ever know about it or use it. Ask about it. If they don't have it, they very well may be willing to add one for you. This will give you
much more wonderful flexibility, which could be very helpful down the road, especially if your 401k grows to be 25%, then 30%, then 35%, then more, of your portfolio. With a brokerage window, you'll be able to rebalance, by buying bonds, cash, and gold within the 401k. Without one, staying balanced and protected could be difficult.
But for now, one way you could implement the plan would be the following:
Put 100% of the 401k into the Spartan S&P 500 Index fund. In your list:
Stock Investments Large Cap SPTN 500 INDEX INST
This fund will have a lower fee than all of the rest (check for yourself). That is a huge deal! Interest compounds, but guess what everyone forgets: fees compound, too! If you're losing one percent per year to fees, you're starting off crippled right out of the gate. To even
match the performance of a simple index fund, you'll have to
beat it by a percent. How are the fund managers going to do that? Do they have some special insight? Let me just tell you: they don't. They can't beat the market --
they are the market! If everyone could beat the market by one percent every year, let me tell you: everyone
would. You can see, then, it's mathematically impossible.
Even more importantly, this fund is not actively managed. Not only will the higher-fee funds fail to make their fees a worthwhile price by consistently beating the market, they will usually get a lower return than the market!! Unbelievable! So what are you paying them for? Exactly! Why would you pay them good money in order to make you less return than you could without them? This is a statistical thing -- there will be outliers and exceptions, such as your large cap growth fund this year, but over the course of many years and many funds, the actively-managed funds under-perform the market. And there's solid, theoretical reasons why they
have to under-perform the market. It's inevitable!
Just get the Spartan index fund. Be average. By trying to get the average, you will actually end up well above average. What a paradox, huh? But the vast majority of investors get returns below those of a simple index fund. So by getting the index fund, you beat almost everyone.
Then, outside the 401k, keep the gold. If you have a massive amount of silver, sell the silver and use it to buy gold instead. Silver is a commodity metal. Gold is a monetary metal. Gold is the one which will protect you in a time of inflation. Silver is not as strongly linked to inflation. Gold is the one you want. A little bit of silver as an emergency supply for some kind of disaster is fine -- maybe a few hundred dollars' worth at the most.
You have a lot of cash, which is good. If the 55% cash represents less than 1 year of living expenses for your family, you probably should just keep it how it is and not change a thing. Cash is a conservative investment. But conservative is not bad. The wealthy are conservative. They know how to protect their wealth. If you want to protect your wealth, do like them.
Wealthy families have about 40 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.
But
if your cash is more than a year's supply, then I would recommend that you consider completing your portfolio's diversification by using some of the cash to
buy 30-year US Treasury bonds. They should be about 25% of your portfolio. These will protect you in case of a time of deflation (or decreased inflation). You can buy the bonds directly from the Treasury's auction web site, or you set up a broker account and do it through them. I would recommend buying them directly. There are no good bond options in your 401k (unless I missed one).
In conclusion, the goal is to be protected in all of the four economic environments. You are protected right now in 3 of the four. Your money will be safe in prosperity, inflation, and recession. Only in a deflation will you be vulnerable to a large loss. So I have recommended that, all else equal, you should move to cover that vulnerability if possible.
I have also recommended tweaks to the other three asset classes. I recommended that you improve the performance of your 25% stock allocation by switching to the Spartan S&P 500 index fund. I recommended that you improve your 25% precious metals allocation by switching it to be exclusively gold, since you cannot count on silver to protect you from inflation. And I recommended that you store your cash in the safest possible way: US Treasury bills or short-term notes.
And for long-term planning and flexibility, I recommended that you find out if you have a brokerage window, and if not, try to get one added.
Most importantly, I recommend that you read up on Harry Browne's Permanent Portfolio so that you can understand more thoroughly the reasoning behind these recommendations. Then you can move forward with a deep and profound understanding of the investment world, and with confidence. Here are the essential books:
Fail-Safe Investing
The Permanent Portfolio
And another big book if you get excited about this stuff and want to really bone up:
Why the Best-Laid Investment Plans Usually Go Wrong: And How You Can Find Safety and Profit in an Uncertain World
