CHICAGO (Reuters) – With the U.S. stock market rallying this year, it may be enticing to take extra cash on hand and ride the bull.
If anything, it is all too easy to pour contributions into actively managed U.S. large-stock funds. Some 90 percent of all retirement plans surveyed last year by the Plan Sponsor Council of America, an employer group, offered actively managed domestic stock funds, and most IRAs and 401(k)s hold these funds.
But a stock fund may not track the market as closely as an index fund. And there are several other asset classes that are worth scrutinizing. If you are jumping into the market with a bit of cash that goes beyond what you already have set up – say, $10,000 out of savings – it would make sense to cover a broad range of global options instead of exclusively focusing on U.S. large-company stocks.
What kinds of funds should you consider if you are a moderate-risk individual already invested in large U.S. stocks? Here are some often-ignored alternatives:
1. A broad sampling of U.S. stocks (60 percent).
If you’re a U.S.-based investor, you’re going to have natural bias toward blue chips in the S&P 500 Index, which has climbed some 9 percent this year, dividends included. But certain industrial sectors have done even better: healthcare is up 16 percent; consumer staples have risen nearly 14 percent, and consumer discretionary stocks are higher by about 11 percent.