Stock Asset Allocation

After checking out my total asset allocation, I decided to drill a little further and look at my stock investment allocation.

After a poor performance last year, I realized that my stock allocation was almost entirely in large-cap stocks and was one reason why my net worth performed poorly when compared to the S&P500.

While I am not a die-hard asset allocation fan, I recognize the benefits of getting some diversification by having at least a little money in different areas. Since the beginning of the year, I have done a couple things to start changing my stock mix:
1) I sold my Bellsouth holdings and moved the proceeds into Vanguard's Extended Market Index ETF.
2) I transferred some money in my 401(k) into international and small-cap mutual funds. I also changed the bulk of my contributions to investing in international mutual funds.

Here is what my stock allocation looks like now:

Wow - still not pretty. You can only imagine how bad it was at the end of last year. I would feel very comfortable with about 30-50% of my stock investments in large-cap stocks. My concern is the lack of exposure to international and small-cap stocks.

Here is what my 401(k)s allocation looks like:

When looked at in isolation, my 401(k)'s asset allocation looks great, but when you look at all my stock investments it is still quite skewed. Since I have a majority of my taxable money invested in dividend-paying large-cap stocks it means I need over-exposure in international and small-cap stocks in my 401(k). I still need to work on this.

My plan at this point is to still increase my exposure to international stocks in my 401(k). I will continue to put the bulk of my new 401(k) contributions into these areas.

Related in Asset Allocation:

Asset Allocation (Sep 18, 2006) Back in early 2006 when I reviewed the returns from my net worth in 2005 I realized I needed to spend some time looking at my asset allocation. Here is what my asset allocation looked like in March: I took...

Here is my current asset (Mar 31, 2006) Here is my current asset allocation for all the assets on my balance sheet (just assets; this ignores liabilities). I don't have cars or personal property listed on my balance sheet so it won't show up here either. I suspect...

Comments (2)

Hi, I was just thinking that since international and small cap funds have recently (past 3-5 years) had a spectacular performance, they may be a bit too expensive nowadays. Besides I think that large caps companies are due for a turnaround in performance.

I agree which is why for the last few years I had been ignoring my allocation. Assuming large-cap will be on the rebound for awhile I am going to be focusing new investments in international and small-cap hoping these will be out-of-favor.

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A personal finance weblog of my journey to reach my goal of $2 million + the value of my primary residence.
Current Net Worth: $1,938,393


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