By Adam Jusko, ProudMoney.com, firstname.lastname@example.org
You’ve got money to invest but you’re not sure how much to put in stocks vs. bonds. Plus, how much to keep in cash? Or, maybe you’ve been investing for a long time but you’re not exactly young anymore. Should you be lowering the amount of stocks you own?
The best asset allocation at any age is going to strike a balance between being aggressive enough to get the upside of the stock market while also protecting some of your money through bonds or other fixed-income assets. The more risk tolerance you have, the more you should put in stocks. If you are leery of putting too much in stocks, you can dial back a bit on those and still have a portfolio that performs well.
Common Asset Allocation Formulas
The 100 Minus
In the past, a suggested formula for how much of your investing dollars to put into the stock market was this:
100 – your current age = % in stocks
In other words, if you were 25:
100 – 25 = 75% of your portfolio in stocks
If you were 55:
100 – 55 = 45% of your portfolio in stocks