Choosing the Best Mix of Risk and Time
June 23rd, 2010 |
Risk and time are the two variables that you must weigh when investing. You will want to choose the right mix of the two for the best outcome possible.
The amount of bonds and cash that you choose to add to your stock portfolio is up to you. You should factor you time and risk tolerance into the amount of money you put into stocks. This is going to be unique to each individual investor. There is no one formula for everyone. There is no right or wrong choice here, its just up to you. You can have more luck with certain strategies though.
If you are aggressive, then you might consider a portfolio that is 70 percent stocks, 25 percent bonds, and 5 percent cash. You can change the numbers around depending on what you choose, but this is a great place to start if you are unsure of what to do. If you have longer than 10 years to invest, then this would probably be an ideal strategy. If you want to have a balanced portfolio, then you might take a different route. You might choose a portfolio that had 50 percent stocks, 40 percent bonds, and 10 percent cash. You will not make as much money with this portfolio, but you might feel safer. This might help you sleep at night better than the other and that’s OK. As we stated earlier, there is no right or wrong plan. There is just a plan that is best for you.
With each choice is risk and reward. With a more aggressive plan, you can expect more gains, but also more losses. With the balanced portfolio, you will experience less possibility for gains, but more chance of not losing that much either. Your downside is lessened dramatically when you choose only 40 percent stocks. You can make your own version of this, and I suggest that you do so. Just invest with care and you will be fine.
Darius has been writing online for a while now and has a lot of different interests. You can check out some of his sites at http://www.computertabledesk.org and http://www.usedrestaurantfurniture.org
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