Let’s say, for example, that technology stocks have a big year.
Asset Allocation: So what is my asset allocation?
There are no sure things in life. The M.D. That’s because while stocks run hot and cold, the correct asset allocation keeps you steered in the right direction for the long-term. Here’s how they work. The very first article I wrote for Financial Horse was on the ideal net worth allocation by age for Singaporeans. Also known as life-cycle funds, these employ another strategy to design your asset allocation by age. If we are right about the macroeconomic backdrop that we laid out in our 2017 Outlook: Paradigm Shift, then Ultra High Net Worth investors, particularly those with large sums of patient capital, are in an excellent position. How to determine your net worth allocation is not typically something you might start doing on your own.
Not including the equity in my primary residence, here it is. *** Last Updated on February 14, 2018 by Michael Quan. A 10% decline in the portfolio would cost $35,000 at …
Each asset class comes with its own risk and reward, and a unique mix of each is required to achieve financial goals at each point in our life.
As you already know from reading this blog, I am a fan of real estate where I invest a significant percentage of my net worth. We’ve talked in detail about the proper asset allocation of stocks and bonds by age. These stand as among the most common default options in 401(k) investment menus. But you can invest in one through most major fund companies.
Target-Date Funds (TDFs) If you have a 401(k) account, you may already be invested in a TDF.
In investing, asset allocation (or the overall composition of your portfolio) is more important than any individual stock within it. If you so happen to have 100% of your investment allocation in stocks before retirement and 2009 happens, well then you are out of luck. When it comes to building wealth, I encourage everyone to focus on a realistic worst case scenario But, it’s actually much simpler than it looks and you can do it manually with my spreadsheet, or even use a web app like Personal Capital to help do it for you.. Financial returns are not guaranteed.
Just know that stocks should be a minority portion of your net worth by the time you are middle age. Many times, we as investors fret over which stock or which REIT to buy, when actually what matters far more is the asset allocation. (But I also invest in stocks and bonds too).
It is best to keep a diversified net worth mix that can withstand the hits of severe economic downturns, while benefiting from multi-year bull runs. Even assuming no asset growth, you can see the dramatic increase in stock exposure at retirement.