Mr. Negativity: all my investment options stink...

[brewer12345]

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How about this: Put 20% of my gross income into my 401k, split evenly between vanguard s&p500 (27%), vanguard small cap (27%), and vanguard emerging markets (27%). This will allow for constant DCA so I won't have to worry as much about buying in at the top of another bubble. Then, do the max per year in a Roth split between the vanguard REIT and a precious metals index fund (each would be about 9% of total equity portfolio). DCA into the REIT/metals funds over the next year to avoid hitting a high point - of particular concern for the REIT. Use the rest of my leftover savings dollars to buy a combination of savings bonds (I or EE) and TIPS. At some point down the road when my income rises and I hit the annual 401k contribution ceiling, open a taxable trading account and keep the portfolio weights the same. Is this too conservative for someone my age? I don't know why capital preservation concerns me so much...but it does.

This sounds like a perfectly reasonable plan to me, and very low cost. The real question is what you will do about rebalancing. Will you rebalance the 401k and Roth portfolios to the asset allocation percentages you have laid out once a year, or not worry about it? I do something very similar in my 401k (50% to s&p 500 and 50% to a diversified international fund) and I really have not bothered about rebalancing thus far simply because it represents under 20% of my investable assets. However, I will probably start rebalancing at the end of this year.

A suggestion on the Roth: instead of precious metals, how about a more diversified commodites allocation? Something like PCRDX.

[brewer12345]

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So what are the good choices? One that I have tried over the past few years is preferred stocks. Medium term stocks (call dates of five to seven years) seem to be averaging about 6%. Any coments from you gurus?

Be careful with preferred stocks. Call dates are NOT maturity dates. In a typical preferred issue, you would have a 25 or 30 year maturity with NC for 5 or 7 years. This means that the preferred gets called away from you if rates drop (i.e. you lose) and the value of the preferred plummets if rates rise (i.e. you lose). Given their long maturity and subordination relative to other forms of fixed income instruments, you are taking on a lot of interest rate and possibly a lot of credit risk with these things. Not my idea of a great investment.

[cute fuzzy bunny]

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A suggestion on the Roth: instead of precious metals, how about a more diversified commodites allocation? Something like PCRDX.

PCRIX has a lower fee structure and can be bought through vanguard with a $5000 minimum. Considering its an institutional fund, thats pretty good.

Note that commodities funds like this are EXTREMELY volatile and you can lose a whole lot of money quickly. Note also that some analyses show it to be a very good counterbalance to stocks...even better than TIPS.

Commodities tend to offset inflation pretty well, and are particularly effective against unexpected inflation.

The big difference between commodities and metals alone is probably psychological. People "flock to the safety of gold and silver" during some bad times, they dont necessarily do that with commodities. More sophisticated (or bored) investors who look at the historic volatillity reduction commodities bring tend to move in and out of them in an unpredictable manner.

Still, it may not be a bad idea to hold 5-20% PCRIX, and I've seen plenty of data to support that (and a bunch that refutes it).

See Raddr's finance web site for more on this, he's a PCRIX afficionado. Maybe he'll see this and chime in a few pieces of data.

[cute fuzzy bunny]

Oh yeah, its...

http://www.raddr-pages.com/forums/index.php

And a couple of good discussions can be found at:

http://www.raddr-pages.com/forums/viewtopic.php?t=347

And

http://www.raddr-pages.com/forums/vi...ight=commodity

Note that PCRIX uses TIPS to collateralize the commodity purchases. In short (and somewhat less accurately) you get the TIPS return AND the commodities return. They can be VERY tax inefficient however.