Should my retirement portfolio imitate my saving portfolio?
One big pie chart.  Traditional (pretax) 401(k) and IRA, Roth 401(k) and IRA, and non-tax favored accounts. All of these need to be viewed holistically, the non-favored money is where I'd keep cash/low return safe instruments, Roth IRA for highest growth. Short Answer: Length of Time invested and risk should be correlated. From what I am hearing this is pretty good game plan for your age.   Minutia: Once you get closer to retirement lets say in 20 years.  You might want to treat two lumps of money with different risk.  For me at 49 I have a lump of money for 55-70 that carries a lot less risk then another lump of money for when I hit 80. This way I can wait and take Social Security at 70 when it pays the most per month.  Then I'll have another pile of money for when my care costs start being very expensive.    Or I think most people would benefit from making sure you have the funds you need for the next 5 years in items with extremely low risk and funds you need 6 years out or more you can have some risk tolerance there. Best laid plans though.
Your asset mix should reflect your own risk tolerance.  Whatever the ideal answer to your question, it requires you to have good timing, not once, but twice. Let me offer a personal example. In 2007, the S&P hit its short term peak at 1550 or so. As it tanked in the crisis, a coworker shared with me that he went to cash, on the way down, selling out at about 1100. At the bottom, 670 or so, I congratulated his brilliance (sarcasm here) and as it passed 1300 just 2 years later, again mentions how he must be thrilled he doubled his money. He admitted he was still in cash. Done with stocks. So he was worse off than had he held on to his pre-crash assets. For sake of disclosure, my own mix at the time was 100% stock. That's not a recommendation, just a reflection of how my wife and I were invested.  We retired early, and after the 2013 excellent year, moved to a mix closer to 75/25. At any time, a crisis hits, and we have 5-6 years spending money to let the market recover. If a Japanesque long term decline occurs, Social Security kicks in for us in 8 years.  If my intent wasn't 100% clear, I'm suggesting your long term investing should always reflect your own risk tolerance, not some short term gut feel that disaster is around the corner. How is not different?  You want to retire early; hence, you will save what you deem necessary to retire early.  On the other hand, if you turn your retirement savings into capital gains; that's good.  Nonetheless, if you start to earn capital gains that is detrimental to the economic value of the state; then, your taxes should be at higher rate to compensate for that.   Everyone encourages business; rarely anyone would encourage a monopoly.  Earning wealth is good business, hoarding wealth is a monopoly. Take the easy approach - as suggested by John Bogle (founder of Vanguard - and a man worthy of tremendous respect). Two portfolios consisting of 1 index fund each. Invest your age% in the Fixed Income index fund. Invest (1-age)% in the stock index fund.  Examples of these funds are the Total Market Index Fund (VTSMX) and the Total Bond Market Index (VBMFX). If you wish to be slightly more adventurous, blend (1-age-10)% as the Total Market Index Fund and a fixed 10% as Total International Stock Index (VGTSX).  You will sleep well at night for most of your life. "Yes, the ""based on"" claim appears to be true – but the Nobel laureate did not personally design that specific investment portfolio ;-) It looks like the Gone Fishin' Portfolio is made up of a selection of low-fee stock and bond index funds, diversified by geography and market-capitalization, and regularly rebalanced.  Excerpt from another article, dated 2003: The Gone Fishin’ Portfolio  [circa 2003] Vanguard Total Stock Market Index (VTSMX) – 15%   Vanguard Small-Cap Index (NAESX) – 15%   Vanguard European Stock Index (VEURX) – 10%   Vanguard Pacific Stock Index (VPACX) – 10%   Vanguard Emerging Markets Index (VEIEX) – 10%   Vanguard Short-term Bond Index (VFSTX) – 10%   Vanguard High-Yield Corporates Fund (VWEHX) – 10%   Vanguard Inflation-Protected Securities Fund (VIPSX) – 10%   Vanguard REIT Index (VGSIX) – 5%   Vanguard Precious Metals Fund (VGPMX) – 5%   That does appear to me to be an example of a portfolio based on Modern Portfolio Theory (MPT), ""which tries to maximize portfolio expected return for a given amount of portfolio risk"" (per Wikipedia).  MPT was introduced by Harry Markowitz, who did go on to share the 1990 Nobel Memorial Prize in Economic Sciences.  (Note: That is the economics equivalent of the original Nobel Prize.) You'll find more information at NobelPrize.org - The Prize in Economics 1990 - Press Release. Finally, for what it's worth, it isn't rocket science to build a similar portfolio.  While I don't want to knock the Gone Fishin' Portfolio (I like most of its parts), there are many similar portfolios out there based on the same concepts.  For instance, I'm reminded of a similar (though simpler) portfolio called the Couch Potato Portfolio, made popular by MoneySense magazine up here in Canada. p.s. This other question about asset allocation is related and informative." At a very high-level, the answer is yes, that's a good idea. For money that you want to invest on the scale of decades, putting money into a broad, market-based fund has historically given the best returns. Something like the Vanguard S&P 500 automatically gives you a diverse portfolio, with super low expenses. As it sounds like you understand, the near-term returns are volatile, and if you really think you might want this money in the next few years, then the stock market might not be the best choice. As a final note, as one of the comments mentioned, it makes sense to hold a broad, market-based fund for your IRA as well, if possible. I have a similar plan and a similar number of accounts.   I think seeking a target asset allocation mix across all investment accounts is an excellent idea. I use excel to track where I am and then use it to adjust to get closer (but not exactly) to my target percentages. Until you have some larger balances, it may be prudent to use less categories or realize that you can't come exactly to your percentages, but can get close.   I also simplify by primarily investing in various index funds.  That means that in my portfolio, each category has 1 or 2 funds, not 10 or 20. "You're right, the asset allocation is one fundamental thing you want to get right in your portfolio.  I agree 110%.  If you really want to understand asset allocation, I suggest any and all of the following three books, all by the same author, William J. Bernstein. They are excellent – and yes I've read each.  From a theory perspective, and being about asset allocation specifically, the Intelligent Asset Allocator is a good choice.  Whereas, the next two books are more accessible and more complete, covering topics including investor psychology, history, financial products you can use to implement a strategy, etc.  Got the time? Read them all. I finished reading his latest book, The Investor's Manifesto, two weeks ago.  Here are some choice quotes from Chapter 3, ""The Nature of the Portfolio"", that address some of the points you've asked about.  All emphasis below is mine. Page 74: The good news is [the asset allocation   process] is not really that hard:  The   investor only makes two important   decisions: Page 76: Rather, younger investors should own a   higher portion of stocks because they   have the ability to apply their   regular savings to the markets at   depressed prices.  More precisely,   young investors possess more ""human capital"" than financial capital;   that is, their total future earnings   dwarf their savings and investments.    From a financial perspective, human   capital looks like a bond whose   coupons escalate with inflation.      Page 78: The most important asset allocation   decision is the overall stock/bind   mix; start with age = bond allocation   rule of thumb. [i.e. because the younger you are, you already have bond-like income from anticipated employment earnings; the older you get, the less bond-like income you have in your future, so buy more bonds in your portfolio.] He also mentions adjusting that with respect to one's risk tolerance.  If you can't take the ups-and-downs of the market, adjust the stock portion down (up to 20% less); if you can stomach the risk without a problem, adjust the stock portion up (up to 20% more). Page 86: [in reference to a specific example where two assets that zig and zag are   purchased in a 50/50 split and adjusted back to targets]     This process, called ""rebalancing,""   provides the investor with an   automatic buy-low/sell-high bias that over the long run usually –   but not always – improves returns. Page 87: The essence of portfolio construction   is the combination of asset classes   that move in different directions at   least some of the time. Finally, this gem on pages 88 and 89: Is there a way of scientifically picking the very best future   allocation, which offers the maximum   return for the minimum risk?  No, but   people still try.   [...   continues with description of   Markowitz's ""mean-variance analysis""   technique...]   It took   investment professionals quite a while   to realize that limitation of   mean-variance analysis, and other   ""black box"" techniques for allocating   assets. I could go on quoting relevant pieces ... he even goes into much detail on constructing an asset allocation suitable for a large portfolio containing a variety of different stock asset classes, but I suggest you read the book :-)" "Note that an index fund may not be able to precisely mirror the index it's tracking. If enough many people invest enough money into funds based on that index, there may not always be sufficient shares available of every stock included in the index for the fund to both accept additional investment and track the index precisely.  This is one of the places where the details of one index fund may differ from another even when they're following the same index. IDEALLY they ought to deliver the same returns, but in practical terms they're going to diverge a bit. (Personally, as long as I'm getting ""market rate of return"" or better on average across all my funds, at a risk I'm comfortable with, I honestly don't care enough to try to optimize it further. Pick a distribution based on some stochastic modelling tools, rebalance periodically to maintain that distribution, and otherwise ignore it. That's very much to the taste of someone like me who wants the savings to work for him rather than vice versa.)" "The goal of the single-fund with a retirement date is that they do the rebalancing for you.   They have some set of magic ratios (specific to each fund) that go something like this: Note: I completely made up those numbers and asset mix. When you invest in the ""Mutual-Fund Super Account 2025 fund"" you get the benefit that in 2015 (10 years until retirement) they automatically change your asset mix and when you hit 2025, they do it again.   You can replace the functionality by being on top of your rebalancing. That being said, I don't think you need to exactly match the fund choices they provide, just research asset allocation strategies and remember to adjust them as you get closer to retirement." "In general, I'd try to keep things as simple as possible. If your plan is to have a three-fund portfolio (like Total Market, Total International, and Bond), and keep those three funds in general, then having it separated now and adding them all as you invest more is fine. (And upgrade to Admiral Shares once you hit the threshold for it.) Likewise, just putting it all into Total Market as suggested in another answer, or into something like a Target Retirement fund, is just fine too for that amount. While I'm all in favor of as low expense ratios as possible, and it's the kind of question I might have worried about myself not that long ago, look at the actual dollar amount here. You're comparing 0.04% to 0.14% on $10,000. That 0.1% difference is $10 per year. Any amount of market fluctuation, or buying on an ""up"" day or selling on a ""down"" day, is going to pretty much dwarf that amount. By the time that difference in expense ratios actually amounts to something that's worth worrying about, you should have enough to get Admiral Shares in all or at least most of your funds. In the long run, the amount you manage to invest and your asset allocation is worth much much more than a 0.1% expense ratio difference. (Now, if you're going to talk about some crazy investment with a 2% expense ratio or something, that's another story, but it's hard to go wrong at Vanguard in that respect.)" Fire your fund manager. There are several passive funds that seek to duplicate the S&P 500 Index returns. They have lower management fees, which will make returns lower than S&P, and they have less risk by following a broadly diversified strategy (versus midcap growing stocks). There's also ETFs, but evidence is growing that they're not as safe as hoped. But here's the deal: the S&P has been on a tear lately. It could be overvalued and what looks like a good investment could start falling again. A possible alternative would be one of the Lifetime funds that seek to perform portfolio adjustment with a retirement decade target; they're fairly new which mostly means nobody knows how they screw you over yet. In theory, this decade structure means the brokerage can execute trading cash for stocks, stocks for bonds, and bonds for cash in house. JoeTapayer has good advice here. I would like to add my notes. If they give a 50% match that means you are getting a 50% return on investment(ROI) immediately. I do not know of a way to get a better guaranteed ROI. Next, when investing you need to determine what kind of investor you are. I would suggest you make yourself more literate in investments, as I suggest to anyone, but there are basic things you want to look for. If your primary worry is loss of your prinicipal, go for Conservative investments. This means that you are willing to accept a reduced expected ROI in exchange for lower volatility(risk of loss of principal). This does not mean you have a 100% safe investment as the last market issues have shown, but in general you are better protected. The fidelity investments should give you some information as to volatility or if they deem the investments conservative. Conservative investments are normally made up of trading bonds, which have the lowest ROI in general but are the most secure. You can also invest in blue chip companies, although stock is inherently riskier. It is pointed out in comments that stocks always outperform bonds in the long term, and this has been true over the last 100 years. I am just suggesting ways you can protect yourself against market downturns. When the market is doing very well bonds will not give you the return your friends are seeing. I am just trying to give you a basic idea of what to look for when you pick your investments, nothing can replace a solid investment adviser and taking the time to educate yourself. he general advice I get is that the younger you are the more higher risk investments you should include in your portfolio. I will be frank. This is a rule of thumb given out by many lay people and low-level financial advisors, but not by true experts in finance.  It is little more than an old wive's tale and does not come from solid theory nor empirical work.  Finance theory says the following: the riskiness of your portfolio should (inversely) correspond to your risk aversion.  Period. It says nothing about your age.  Some people become more risk-averse as they get older, but not everyone.  In fact, for many people it probably makes sense to increase the riskiness of their portfolio as they age because the uncertainty about both wealth (social security, the value of your house, the value of your human capital) and costs (how many kids you will have, the rate of inflation, where you will live) go down as you age so your overall level of risk falls over time without a corresponding mechanical increase in risk aversion. In fact, if you start from the assumption that people's aversion is to not having enough money at retirement, you get the result that people should invest in relatively safe securities until the probability of not having enough to cover their minimum needs gets small, then they invest in highly risky securities with any money above this threshold. This latter result sounds reasonable in your case.  At this point it appears unlikely that you will be unable to meet your minimum needs--I'm assuming here that you are able to appreciate the warnings about underfunded pensions in other answers and still feel comfortable.  With any money above and beyond what you consider to be prudent preparation for retirement, you should hold a risky (but still fully diversified) portfolio.  Don't reduce the risk of that portion of your portfolio as you age unless you find your personal risk aversion increasing. If the portfolio itself is taxable, then yes; if you have two stocks and you're rebalancing them, without using new cash, you are forced to sell one stock to buy another. That sale is taxable, unless you're in some sort of tax deferred/deductible account, such as an IRA.   If you're talking about you being in a mutual fund and the fund itself rebalances, the same rules apply as above, though indirectly; you'll have capital gains realized and distributed to you, those gains will be taxed unless, again, your account is a retirement account. Most of the “recommendations” are just total market allocations.  Within domestic stocks, the performance rotates. Sometimes large cap outperform, sometimes small cap outperform. You can see the chart here (examine year by year):  https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1428692400000&chddm=99646&chls=IntervalBasedLine&cmpto=NYSEARCA:VO;NYSEARCA:VB&cmptdms=0;0&q=NYSEARCA:VV&ntsp=0&ei=_sIqVbHYB4HDrgGA-oGoDA Conventional wisdom is to buy the entire market. If large cap currently make up 80% of the market, you would allocate 80% of domestic stocks to large cap.  Same case with International Stocks (Developed). If Japan and UK make up the largest market internationally, then so be it.  Similar case with domestic bonds, it is usually total bond market allocation in the beginning.  Then there is the question of when you want to withdraw the money. If you are withdrawing in a couple years, you do not want to expose too much to currency risks, thus you would allocate less to international markets. If you are investing for retirement, you will get the total world market.  Then there is the question of risk tolerance. Bonds are somewhat negatively correlated with Stocks. When stock dips by 5% in a month, bonds might go up by 2%. Under normal circumstances they both go upward. Bond/Stock allocation ratio is by age I’m sure you knew that already.  Then there is the case of Modern portfolio theory. There will be slight adjustments to the ETF weights if it is found that adjusting them would give a smaller portfolio variance, while sacrificing small gains. You can try it yourself using Excel solver.  There is a strategy called Sector Rotation. Google it and you will find examples of overweighting the winners periodically. It is difficult to time the rotation, but Healthcare has somehow consistently outperformed. Nonetheless, those “recommendations” you mentioned are likely to be market allocations again.  The “Robo-advisors” list out every asset allocation in detail to make you feel overwhelmed and resort to using their service. In extreme cases, they can even break down the holdings to 2/3/4 digit Standard Industrial Classification codes, or break down the bond duration etc.  Some “Robo-advisors” would suggest you as many ETF as possible to increase trade commissions (if it isn’t commission free). For example, suggesting you to buy VB, VO, VV instead a VTI.