Question: I am starting my 401k, what stocks should I choose?

My employer is offering a 401k which I will like to take advantage of but when they said I have to choose where I want to invest my money into I just simply didn't know.
Here are some of my options.
1. JPMorgan Mid Cap Growth A
2. JPMorgan Mid Cap Value Fund
3. BlackRock S & P 500 Index Fund
4. BlackRock Large Cap Growth Fund
5. BlackRock Large Cap Value Fund
6. BlackRock Value Opport Fund Inc. A
7. Retirement Reserve (7day Yield:0.0%)
8. BlackRock Global Allocation Fund
9. BlackRock Total return Fund
10. BlackRock Science & Technology Opp A
11. BlackRock Health Science Opp Port Inv A

Answer:

Over the long term, technology will grow more than bonds or the general market. Biotech and drugs are a technology. Small and medium caps will out perform large caps over a longer period.

That being said, there is a business cycle. You might investigate what it is and how it effects returns on stocks. At specific points in the business cycle it is best to be in specific asset classes.

Everyones situation is unique. This is why everyone should talk to a financial advisor. Its a requirement that your company provides you someone to talk to with questions about things like this.

This is an extremely difficult position that companies put you in without giving you any guidance. They make it even worse by giving you somewhat poor choices generally.

BR Global Allocation consists of about 60% stocks, 20% bonds, 10% cash, and 10% who knows what. Its performance is about average for that type of fund. It invests about 1/2 in US stocks and 1/2 in foreign large cap stocks. Its 10 year performance averages about 9% annually (not too bad). Might consider 25% investment in that one.

BR Health Science Opp is perhaps a good choice. People are always spending more on health care and living longer too so they spend more for a longer period of time. It is considered a better than average fund in that segment. Its 10 year performance averages about 11.5% annually (actually very good). Might consider 35% investment in that one.

BR Total Return Fund is a bond fund. Investment advisers would say that one should have a certain % in bonds. In general that is a good idea, but currently it is not a good idea at all because interest rates are too low. I would recommend avoiding this one completely in today's environment. Besides the Global Allocation Fund does contain some bonds.

BR Value Opp Fund has one of the worst records in its category. I do not really understand why. Its 10 year annual return is 5.2%--not great but not bad either. It is because its competitors in that category have much better returns, but you do not have access to any of those. It invests in small and mid-cap companies. These type of companies do have a tendency to outperform larger cap companies because they have more opportunity for growth, but on the other hand when the economy suffers as it currently is these type of companies tend to perform poorly. To diversify your asset allocation you really might consider a small portion in this one--maybe 15%. If the economy does recover this one might very well do extremely. It did however loose 1/2 its value during 2008.

JPM Mid Cap Growth has a record very similar to the Value Opp Fund. You really do not need both. Choose one or the other.

JPM Mid Cap Value is a fund of a different nature from the one above. It actually has a very good performance record of about 9% annual return over the last 10 years. It is rated above average. Being mid-cap though it can be somewhat volatile. Maybe 10 to 15% here.

BR 500 index fund. I am sort of outside the main stream in my opinion of this one. I do not like it at all because it is cap weighted. That means you are investing most of your money in just a few stocks many perhaps overpriced. Its 10 year annual return is about 4%. You might note that is less than any of the above.

BR Large Growth has a record similar to the BR 500 index fund. I wouldn't bother with it.

BR Large Value has a record only very slightly better than the BR 500 index fund. Another looser.

Well that still leave you with 25% left over. Stick it in the Retirement Reserve. Safe there for the time being. If the market tanks which it might very well do, it will come in very handy at that point in time.