My Investments - 401(k)

My investments fall generally into two categories, my 401(k), which is tactically allocated across various equity funds, and my personal portfolio, which is comprised of funds in my Roth IRA and my brokerage accounts. Since the funds in my 401(k) are not publicly traded funds (they are trusts of the Frank T. Russell Co that invest in multiple funds in their respective asset categories), I will not spend much time on them.

My current allocations are approximately

30% large cap value
25% large cap growth
20% small caps
20% international
5% cash

Since mid 2005, I have been allocating away from small caps, and toward large cap value stocks, and cash. This has produced decidedly inferior results to putting all of the money into small and international stocks, which have rallied strongly. However, I think that we are coming to the end of small cap dominance, because small caps are disproportionately dependent on bank financing bank financing usually comes with variable rates tied to the prime rate, which is increasing in lock step with the federal funds rate. Thus, credit is tightening faster for small cap companies than it is for large, diversifed companies that float debt directly through the capital markets (and which usually carries a fixed rate).

Most changes in leadership end badly for the former leaders, as people begin realizing that there are more attractive investments elsewhere. I am following the advice of Nathan Rothschild, who said that always sold to soon (but always when buyers were plentiful). Actually, smalls have rallied so dramatically that even though none of my new contributions go to purchasing small shares in this account, its percentage is remaining stable. I will probably look to take some more small cap money off the table, and potentially reallocate to international shares, which are likely to continue to perform well in their own right, and even better in US dollar terms.

Another mistake, in 2005, I also took some money off the table from international stocks, correctly anticipating a dollar rally, but failing to appreciate that international stocks would rally so strongly, that they would overcome even dollar strength.

I would very much appreciate thoughts on international investing, where I admit that I stick to funds, because reporting rules for non-US equity are different, and often use different accounting standards, so doing fundamental research is more difficult. What do you do?

Most of my discusssions on this blog will focus on my other investments, but I wanted to put these on the table, since in dollar terms, they still represent more than 50% of my net worth.