Asset Allocation

Why is it IMPORTANT to know your current asset allocation as it relates to your portfolio?

2 thoughts on “Asset Allocation”

  1. Mike Finley says:

    Your asset allocation, how much you have in stocks (or other short-term risky assets) vs. bonds (and cash), will ultimately tell us what your future returns will be. Basically, how your portfolio is broken down ultimately dictates futures returns.

    If you decide on a cash heavy portfolio, then you should expect yearly returns under 2% going forward. Bonds? Maybe 2 – 4% (based on the type of bonds you own). Stocks? Maybe 8 – 12% (based on the types of stocks you own).

    Now, all those returns are before cost. To get anything close to those returns you would be wise to focus on no-load index mutual funds that keep your costs below .2% and ideally below .1%. Learn more on this issue by reading What Color is the Sky. Financial freedom to follow!

  2. Mike Finley says:

    Your asset allocation, how much you decide to have in your portfolio in stocks (or other short-term risky assets) vs. bonds (and cash), will ultimately tell us what your yearly returns (they will vary) will be. Basically, how your portfolio is broken down ultimately gives us a peek into the future.

    If you decide on a cash heavy portfolio because you are risk averse, then you should expect yearly returns under 2% going forward (no risk, no return). What about bonds? Maybe 2 – 4% (based on the type of bonds you own). What about stocks? Maybe 8 – 12% (based on the types of stocks you own).

    Now, all those returns are before cost. To get anything close to those yearly returns you would be wise to focus on no-load (no commission) index mutual funds that keep your costs below .2% and ideally below .1%. Learn more on this issue by reading What Color is the Sky. Financial freedom to follow!

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