Asset Allocation

[rutgers07]

I'm getting a little confused about how to go about constructing my Roth. My 401k is simple enough as I'm following the 3 fund portfolio and am divided between bonds, international, and US stocks. For my Roth, I only have about 6k in there right now but plan to max it out again this year. In terms of allocating where the money goes, it was sitting in a small cap fund but I recently moved it into a target date fund. I do like the 3 fund approach but the 3 funds I would use through Vanguard require me to have at least 3k in each one. Does this mean I should wait until I have built up enough (couple years) in the Target fund and then do my asset allocation? Or would it be best to just pick a fund out of those 3 and let it sit there until I have enough money. Does it matter? Am I completely overthinking it?

And perhaps a more broad question is when speaking about asset allocation, is it important to spread out things in EACH retirement account (401k/Roth) or it's more important to spread out between the 2 accounts?

[disneysteve]

I'll answer the 2nd question first. I'm of the opinion that your overall allocation is what matters, not the allocation in each individual account. There are also pros and cons to keeping certain asset types in certain types of accounts which supports that even more.

Regarding the first question, I think the Target fund is a good choice to park money until you have sufficient assets to do the 3-fund portfolio in your desired allocation. Does it matter in the grand scheme of things? Probably not if you are maxing out the account every year because you'll have enough to diversify soon enough so keep it simple. Do the Target fund until you have the money to split it up. That's what I had my daughter do with her Roth. I'm not a huge fan of the Target funds but she was only putting in $1,600 and I felt that was the best option for a small account.

[feh]

As Steve said, you don't need to duplicate your AA in each account. View your portfolio as a whole, not as individual accounts.

Start here: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

[jIM_Ohio]

I'm getting a little confused about how to go about constructing my Roth. My 401k is simple enough as I'm following the 3 fund portfolio and am divided between bonds, international, and US stocks. For my Roth, I only have about 6k in there right now but plan to max it out again this year. In terms of allocating where the money goes, it was sitting in a small cap fund but I recently moved it into a target date fund. I do like the 3 fund approach but the 3 funds I would use through Vanguard require me to have at least 3k in each one. Does this mean I should wait until I have built up enough (couple years) in the Target fund and then do my asset allocation? Or would it be best to just pick a fund out of those 3 and let it sit there until I have enough money. Does it matter? Am I completely overthinking it?

And perhaps a more broad question is when speaking about asset allocation, is it important to spread out things in EACH retirement account (401k/Roth) or it's more important to spread out between the 2 accounts?

Overweight one sector, or reduce 401k by $6k in same asset class