November 2, 1997

Q. My wife is 36 and built a $72,000 401(k) account from previous employment, invested since April in Scudder Growth and Income. It has done pretty well so far, but I am worried that we are taking too much risk with everything in one fund. Should I be? In her new job, she will contribute at least $150 a month to a retirement plan there. She plans to work until she is 55. I have a 401(k) plan with a $95,000 balance, invested in a stock index fund. I contribute $500 a month. I am also 36, and plan to work until I'm 57. How much can we reasonably expect to have by the time I retire, and will it be enough to provide us with a $5,000 monthly income stream?

J.W., San Diego

A. I don't think you have much to worry about on either count. While a diversified portfolio of mutual funds is nice, for most people -- and especially for people who are many years from retirement -- one solid mutual fund can serve the bill nicely.

And you'll want a portfolio that's spread among many issues and industry sectors, so that your fortunes won't be tied to a company or sector that might get in trouble. With a portfolio of 133 stocks (as of the last Morningstar Mutual Funds tally) the Scudder fund delivers this diversification. Its largest holding (Xerox Corp.) represents but 3.4 percent of the portfolio. Moreover, the fund has maintained a discipline of low turnover, investing in value-oriented issues and sticking with them. Finally, since your own 401(k) is invested in a more broadly diversified fund, I think as a couple you have diversification enough. You may want to make some changes later -- say when you're eight or 10 years away from your anticipated retirement date -- to add balanced and even some fixed-income holdings.

You're also in fine shape toward reaching your financial goal -- in fact, you should far outpace it. Assuming 10 percent average annual growth over 21 years, and with $150 monthly contributions for the first 19 of those years, your wife's account would grow to $649,376. Your account would grow to $1,104,643 over 21 years. This would give you a grand total of $1,754,019.