Investment Strategy

Investment Strategy

What investment strategy should I use. My broker has told me that I should be allocated 50/50 as between stocks and bonds. Does this make sense?


Everyone should wear a size 9 shoe! Investment strategies should be based on a plan specifically tailored to your circumstances. 50/50 may work, but do you wear a size 9 shoe? You should ideally start with a long term budget. What are your cash flow needs? Are you saving? What large expenditures (college, house, legal fees!) are you planning? What is your risk tolerance? What rates of return on your portfolio do you need to achieve your financial goals? Are these tolerable from a risk perspective?

One of the key investment concepts is that you should diversify your investments amoung a broad class if asset classes to minimize your risk (certain classes of assets tend to move in opposite directions based on market conditions). Bonds and "stocks" alone are not really a fully diversified portfolio. Also, within the category of "stocks" you might be invested in large capitalization stocks, mid-cap, small-cap, equity hedge funds, international stocks, and so on.

See a financial planner. Also, understand what motives and goals the "planner" has. Are they fee only? Selling product? Looking for a long term relationship or a quick killing?

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