The fact that you are reading my blog post is a pretty good indication that you have an interest or concern about your investment strategy especially your asset allocation. By asset allocation I simply mean that you should be keenly interested in how much of your portfolio is invested in either stocks, bonds or cash.
It goes without saying that those decisions are greatly influenced by your age and then less importantly to your net worth. If you are in the final five to seven years before your projected retirement then you should really be feeling an emotional aversion to risk.
I know a little bit about risk. I am in my early sixties and I have an eye on retirement. I had been pretty "hands off" when it came to my investment funds. I was putting too much trust in target date funds which most of you know don't really protect you very much in big down turns. I found out the hard way in December and then January of 2019. I decided to do something about my stock exposure.
I know what you're thinking, "This guy should have been all over asset allocation a few years ago"!
But I wasn't and now I'm doing a little catching up and I have to say that the last several months have been way less stressful in market down turns and surprisingly profitable in the up turns. I owe my good fortune to a blog called SmartAsset.
This blog post contained a formula called The 100 Rule. This rule simply states that you take your age and subtract it from 100. The number that you come up with is the percent of your portfolio that should be invested in stocks. In my case, 100-63= 37. I should be in the stock market with only 37% of my investments.
I was so impressed by this formula that I made adjustments. I got out of the stock market with the exception of about 25% and invested the rest in bonds and money market funds. I have found that 25% still provides an opportunity to reap rewards when this great Trump economy is having a great week. I have also found that I don't chew my finger nails when the sky is falling.
Since folks are living so much longer than they were 20 years ago it makes sense to keep in the stock market throughout your retirement. I plan to keep adjusting my portfolio as I age and I would recommend the same for my readers.
If you are reading this post and you are 30 then I hope you are taking the 100 Formula seriously and aggressively investing 70% of your holdings in stocks. Time and risk are on your side.
I didn't really address the issue of net worth in this post and the title indicated that I would. I would simply say that net worth should not be that much of a deciding factor unless you are ridiculously well off and a market blood bath doesn't even register on your Richter scale.
I hope that this post has been helpful and I hope that you are making mad progress toward your investment goals.
I know a little bit about risk. I am in my early sixties and I have an eye on retirement. I had been pretty "hands off" when it came to my investment funds. I was putting too much trust in target date funds which most of you know don't really protect you very much in big down turns. I found out the hard way in December and then January of 2019. I decided to do something about my stock exposure.
I know what you're thinking, "This guy should have been all over asset allocation a few years ago"!
But I wasn't and now I'm doing a little catching up and I have to say that the last several months have been way less stressful in market down turns and surprisingly profitable in the up turns. I owe my good fortune to a blog called SmartAsset.
This blog post contained a formula called The 100 Rule. This rule simply states that you take your age and subtract it from 100. The number that you come up with is the percent of your portfolio that should be invested in stocks. In my case, 100-63= 37. I should be in the stock market with only 37% of my investments.
I was so impressed by this formula that I made adjustments. I got out of the stock market with the exception of about 25% and invested the rest in bonds and money market funds. I have found that 25% still provides an opportunity to reap rewards when this great Trump economy is having a great week. I have also found that I don't chew my finger nails when the sky is falling.
Since folks are living so much longer than they were 20 years ago it makes sense to keep in the stock market throughout your retirement. I plan to keep adjusting my portfolio as I age and I would recommend the same for my readers.
If you are reading this post and you are 30 then I hope you are taking the 100 Formula seriously and aggressively investing 70% of your holdings in stocks. Time and risk are on your side.
I didn't really address the issue of net worth in this post and the title indicated that I would. I would simply say that net worth should not be that much of a deciding factor unless you are ridiculously well off and a market blood bath doesn't even register on your Richter scale.
I hope that this post has been helpful and I hope that you are making mad progress toward your investment goals.
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