Thursday 25 June 2009

A favourite Formula for Asset Allocation

Age is the key to asset allocation. The older you are, the less you should have in common stocks.

If you are age 65, you should have 65% in common stocks, with the rest in a money-market fund.

If you are younger than 65, add 1% per year to your common stock sector. As an example, if you are 60 years old, you will have 70% in stocks.

If you are older than 65, deduct 1% a year. Thus, if you are age 70, you will have only 60% in stock.

Here is a table breaking down the 2 percentages by age:

Age--Stocks--Money-Market Funds

40---90%---10%
45---85%---15%
50---80%---20%
55---75%---25%
60---70%---30%
65---65%---35%
70---60%---40%
75---55%---45%
80---50%---50%
85---45%---55%


Related posts: Some Simple Formulas for Asset Allocation
How Much Should You Invest in Stocks?
Asset Allocation is not the same as Diversification
A Simple Approach to Asset Allocation
Forget about Everything Else and Buy Only Stocks
Some asset allocation options to consider
A favourite Formula for Asset Allocation

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