Asset Allocation

December 09, 1999

WingspanBank.com presents Catherine Hickey, Editorial Analyst with Morningstar, who discusses in an online interview, investing, asset allocation, and mutual funds.

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WingspanBank: WingspanBank.com is proud to introduce Catherine Hickey, an editorial analyst with Morningstar. Today, Catherine will answer your questions about asset allocation. For a schedule of upcoming chats on a range of topics, go to our site at www.wingspanbank.com and select the "Plan" tab.

Catherine Hickey: Hello, it's nice to be here this evening.

Assetguy: How often should I analyze my asset allocation in my 401K?

Catherine Hickey: It's something that all investors have to determine for themselves. It depends on what your investments are in your 401K. If you have some racier funds that are more growth oriented, you may want to check them more often, but it's up to you. If you determine an asset allocation that fits your goals, you may not have to reassess it too often.

Xiannie: I'm 36 years old. How much of my paycheck should I be putting into 401k vs. employee stock purchase plans?

Catherine Hickey: Again, it depends on your own goals. I can't give personalized portfolio advice, but you should look at things like how far away you are from retirement, how aggressively you want to invest, what type of stock your company offers, and the types of funds in your 401K plan.

Bright Angel: One of the most difficult things about finances seems to be the lingo. Can you please explain asset allocation in common English? Thanks.

Catherine Hickey: It's so true, and I know at Morningstar we are always trying to break things down, but it's tough. Asset allocation simply means how much of your money or your portfolio should go into different investments. It's a way that people use to meet their financial goals. Typical investments are individual stocks, mutual funds, bonds, and cash.

Sookie: my daughter is 18 and beginning marriage. Is this too young to start investments?

Catherine Hickey: It's never too young to start. I wish I had been investing when I was 18. The longer your money is invested, the more time it will have to grow, and the more you will likely have in the end, so this is a great time. Now is usually the best time to start investing.

Bright Angel: What funds do you feel are currently the most stable given the end of the year scares?

Catherine Hickey: Well, I can't recommend specific funds, but I don't think Y2K will have a huge effect except for maybe on some technology stocks that some people think will have Y2K-related problems. There probably isn't one group of funds that you should pick over another due to Y2K concerns, unless you want to steer clear from some technology funds.

Sfcarl: I only invest in mutual funds. How should that affect my asset allocation?

Catherine Hickey: Well, it depends on which mutual funds you own. If you have some aggressive funds, you might either want to pick some less aggressive funds, or if you are comfortable owning individual stocks, some of those, or some bond funds. But it all depends on which mutual funds you do own. Diversification should be the key. You want to balance different types of investments.

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