Good day everyone! Hope you’ve all had a fantastic week and are ready to relax a bit this weekend. Today I decided to talk about a topic I’ve gotten some questions about over the years – what my portfolio Asset Allocation looks like and why. I wanted to take this post a step further and provide you with some tips to keep in mind as you are building your own personal allocation strategy.
Before we get into that, I wanted to explain what I mean by “Asset Allocation”. Here is the simplified/straight to the point definition:
Asset Allocation is simply the strategy of allocating your money towards stocks, funds, bonds, and/or cash in your portfolio in a way that it reflects your risk tolerance as well as your investing horizon and investing goals.
So, for example, someone who is approaching retirement age may have most of their portfolio in conservative funds, bonds, and cash because they don’t want to risk a market downturn and suffer great market loses right before they are set to retire.
Another example can be someone in their early 20s or 30s that may be far away from retirement age and may have most of their investing money in individual stocks. This person may feel they have the time horizon to be able to “ride out” any significant downturns in the stock market. Having their money in stocks is something they are comfortable with. There could be different extremes of this kind of investor – from someone with high tolerance for risk to someone who is a bit more conservative.
My final example would be someone (of any age) who simply likes to be well-diversified and wants to have some of their money in index funds, some in ETFs, some in individual stocks, and finally, some in cash and maybe bonds in order to cover all bases. This person has a low to moderate risk tolerance and wants to make sure they are participating in the stock market by incorporating different types of investments in their portfolio.
In order to identify your own personal Asset Allocation strategy, here are [some] questions you can start asking yourself:
- What is your PERSONAL risk tolerance? Do you completely freak out every time the market is down to the point that you want to cash out immediately OR are you fairly comfortable with overall market downturns?
- What is your investing horizon? How long do you want to have your money invested?
- What are your investing goals or general financial goals? How much money do you need to comfortably reach that specific goal(s)?
On a [very] personal level, my portfolio allocation is composed of individual stocks and cash. I consider myself someone with “medium” or “moderate” risk tolerance so while I do have mostly stocks in my portfolio, I don’t see my allocation as one of ‘significant risk’ because I focus on companies that have a track record of success and solid plans for ongoing future growth.
While individual stocks may sound “risky” by nature, I am more on the conservative side of things and do make sure that I do my due diligence and choose solid corporations that have the foundation to continue to growing, expanding, and profiting for years to come.
I also make sure my stocks are from a variety of different sectors although most are concentrated in a few such as consumer staples, technology, consumer discretionary, and some health care.
You will never see me adding anything super risky to my portfolio – most of you already know I am against penny stocks, currencies, cryptocurrencies or anything related to that. I am also not a fan of putting my money in the “latest fad”. I am just not that type of investor and my portfolio asset allocation reflects that.
And there you have it! I shared a bit of how Asset Allocation works and provided a glance of what my personal allocation looks like.
In case you are interested (or are not aware) in my upcoming investing boot-camp I share with my students a list of all the stocks that are currently in my portfolio, when I purchased them, and how they are doing so far. I also share the thought process behind each of my investments! This is one of my favorite parts of the course.
If you are not yet enrolled but are interested in taking part, make sure to add your name to the list asap. Enrollment closes on 8/11/17 and class begins on Monday 8/14.
TELL ME – What does your portfolio asset allocation look like? OR, if you don’t yet invest – what kind of allocation do you feel you would be personally comfortable with? Let me know in the comments of join the discussion over at our Facebook Group.
Cheers to profits!
- For details on our next investing course click here.
- If you are looking for our Amazon best seller for investing beginners, click here 🙂
Girl$ on The Money is a stock market education company and does not provide any specific stock or investment recommendations. All information provided is solely for educational purposes and not to be construed as an offer or recommendation to buy, hold, or sell any securities. Investing involves risk, including possible loss of principal. Diversification cannot ensure a profit or that an investor’s goals will be met and cannot eliminate the risk of investment losses.
One thought on “Let’s Talk About Portfolio Asset Allocation – And How To Figure Out Your Own!”
My portfolio asset allocation is just like yours, Mabel. My investment is comprised with 100% individual stocks. I have cash, too.