Asset Allocation Strategies

You wouldn’t want all of your eggs in one basket, would you? Likewise, it’s a good idea to diversify the type of the investments in your portfolio. When one part of the market is down, another will be up, and vice versa. A good retirement portfolio might be split up between bonds, big company stocks, international stocks, real estate investment trusts, small cap stocks (for growth) and even some money market funds. Each portfolio ingredient carries its own risks and returns. Generally, those with lower risk have lower returns and vice versa

 

Type of   Typical   Dividend/   Risk
Investment   Annual   Income     (1-10)
    Total   (incl in Ret)    
    Returns*        
             
Certificate of Deposit   3% to 6%   3% to 6%   2
             
U.S. Bonds   3% to 5%   3% to 5%   1
             
Corporate Bonds   4% to 7%       3
             
Large Company Stocks   5% to 9%   1% to 5%   4
             
Midsize Company Stocks   6% to 10% 0 to 2%   5
             
Small Company Stocks   8% to 13% 0   7
             
Real Estate Investment Trusts   6% to 10% 4% to 8%   5
             
International Stocks   6% to 30% 0   6
             
Emerging Market Stocks   12% to 35% 0   8
             
             
* 'Typical' as per actual  results from 1950-2005       
             

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