Thursday, 25 June 2009

Some asset allocation options to consider

For the ultraconservative investor, a suggestion is for you to invest only 55% of your portfolio in common stocks. To be sure, when the stock market is marching ahead, as it has in the 90s, you won't be able to keep pace. But if it falters and heads south for a year or two, like recently, your cautious approach will keep you out of the clutches of insomnia.

Generally, such an approach is considered timid, and is not the best way to approach asset allocation. However, many are using this formula and are not complaining.

A better way to handle the uncertainty is to invest 70% in stocks, with the rest in a money-market fund. Once you decide on a particular percentage, stick with it. Don't change it every time someone makes a market forecast.

These market forecasts don't work often enough to pay any attention to them. No professional investor has a consistent record in forecasting. Every once in a while, one of these pundits makes a correct call at a crucial turning point, and from that day on, every one listens intently to the pronouncements of this person - until the day the pronouncement is totally wrong. That day always come.

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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