Academic studies have also shown that about 90% or more of portfolio returns are generated by asset class selection and weights. Only about 10% or less of a long-term return is generated by security selection, i.e. purchasing individual stocks.
An aggressive investor will choose a higher weighting for stocks than an investor seeking capital preservation and secure returns.
A popular rule is:
100 – your age = percentage of stocks in portfolio
Rebalancing of your portfolio on a yearly basis to correspond with this allocation will place a smaller weighting on stocks when you grow older and preserve capital for your retirement.
Showing posts with label choosing the right asset allocation. Show all posts
Showing posts with label choosing the right asset allocation. Show all posts
Friday, October 30, 2009
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