How should you split your investment portfolio between stocks and bonds?

Answer 1

Answer

General Rule of Thumb: 100 - Your Age = Percentage Investment in Stocks.

Why? Over long periods of time, stocks return more than bonds. On average, stocks have returned 12.00% vs 5% on long-term government bonds (loans > 5 years).

So, the younger you are, the more time you have for the stock market to cycle through upturns and downturns, and allow you to share in historically attractive returns.

Note this is a rule of thumb for long-term investing, and this is exactly why your time horizon matters so much when you think about where to put your money.

Hypothetical $1,000 Asset Allocation for a 30-Year-Old:

• 70% : $700 in Stocks (Equities)
• 30% : $300 in Government or Highly Rated Bonds

Of course, you need to decide if the recommended allocation meshes with your personal risk tolerance and market views.

This recommendation is the same as saying you that yoou should look at your timeline for the investment: the longer you invest, the more time you have to ride out market volatility, so you can increase the amount of riskier assets you hold, such as stocks.

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