Choose Your Asset Allocation

By: Pete
Date posted: 12.06.2011 (11:15 am) | Write a Comment  (0 Comments)

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Each investor has a target asset allocation and that will change over time. Personal changes, net worth fluctuations, an approaching retirement and many other factors will end up playing an important role in how you want your portfolio to look. The more you need the money that you have invested, the less you can afford to lose which means a safer asset allocation.

I consider that US investors would without any doubt have the following asset classes:

-Domestic Stocks
-Foreign Stocks
-Bonds

International investors would have a minimum of 4:

-Domestic Stocks
-US stocks
-International excl. US
-Bonds

Any portfolio that has $10-15K or less would probably focus entirely on these asset classes. When adding additional ones, it would simply mean a more precise split:

-International Stocks would become:

-EAFE
-Emerging Markets

And bonds would become:

-Corporate Bonds
-Government Bonds
-International Bonds

Here are some examples:

Investor #1 (retired) being the most conservative and Investor #10 being very aggressive (very young)

Simple US Investor Portfolio

Domestic StocksForeign StocksBonds
Investor 110090
Investor 215085
Investor 320080
Investor 425570
Investor 5301060
Investor 6351550
Investor 7402040
Investor 8452530
Investor 9503020
Investor 10553510

Simple Foreign Investor Portfolio

Domestic StocksUS StocksForeign StocksBonds
Investor 155090
Investor 27.57.5085
Investor 31010080
Investor 412.512.5570
Investor 515151060
Investor 617.517.51550
Investor 720202040
Investor 822.522.52530
Investor 925253020
Investor 1030303010

More Complex US Investor Portfolio

Domestic StocksEAFEEmerging MarketsCorporate BondsGovernment BondsInternational Bonds
Investor 1100040500
Investor 2150040450
Investor 3200040400
Investor 4252.52.535350
Investor 5257.57.530300
Investor 630101025250
Investor 73512.512.520200
Investor 835202015100
Investor 93522.522.51055
Investor 10352525555

More Complex Foreign Investor Portfolio

Domestic StocksUS StocksEAFEEmerging marketsCorporate BondsGovernment BondsInternational Bonds
Investor 1550040500
Investor 27.57.50040450
Investor 310100040400
Investor 412.512.52.52.535350
Investor 512.512.57.57.530300
Investor 61515101025250
Investor 717.517.512.512.520200
Investor 817.517.5202015100
Investor 917.517.522.522.51055
Investor 1017.517.52525555

As time goes by you could add income stocks, alternative asset classes, and even more. We will provide a number of portfolio examples that you could use to start off with.


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