Am 22 yrs. old what type of portfolio would I really benefit from, Moderate or Agressive? It's better to have more Stocks & some Bonds or the other way around?
2007-03-22 22:20:11 · 5 answers · asked by Brenda 1 in Business & Finance ➔ Investing
You are very young so you can be aggressive. In fact ,VERY aggressive!
A common formula used by investment advisors is
(130-age)= % of stock in your portfolio
(round to the nearest 5 or 10%) [The result can be adjested +/- 10% depending on your risk tolerance - add 10% if you are a Risk taker and take away 10% if oyu are very conservative]
For you its still 100% stocks! You don't need bonds at this point. You have 40+ plus before you will need this money. Even if Stocks take a big hit in the next 10 years, you have 30+ years to recover. So the added safetey of bonds will only lower your longterm returns for an investor with 40+ years to invest and itsnt worth it.
As you get older you can add bunds to your investments. Just keep using the formula above.
Even though you are 100% stocks. You want to diversify within the different groups of stocks. Small companies, large companies, foriegn companies, etc.
2007-03-23 03:38:56 · answer #1 · answered by random_market_investor 2 · 0⤊ 0⤋
This is one of the toughest decisions. There is no correct answer unfortunately. Moderate diversification, I believe most would agree, is best. Not too much of any one thing.
Here are a couple of things for you to consider in making your choices.
Stocks over the long term outperform bonds by about 6% annually. Unfortunately, within a 401k you do not get the full tax benefit of stocks since it will all be taxed at the regular tax rate when it is withdrawn. That tends to make bonds and short term money market investments within a 401k somewhat more attractive, but not much.
The main problem with agressive is that the sword cuts in both directions. If the market turns down, which is likely, agressive can leave your 401k in the red for a long time. A little agressive is not without merit, but too much can be a killer. Also to consider is the value of the dollar, or I should perhaps say the lack of value of the dollar. Consequently, a portion invested in European and other foreign investments can offer some protection.
2007-03-23 00:39:13 · answer #2 · answered by Anonymous · 0⤊ 0⤋
At 22, time is on your side. For long term investing, you should be 100% stocks, but have a mix of different types of stock. I would say 30% Large Cap Value, 30% Small Cap Value, 20% Large Cap Growth, and 20% Mid Cap Growth. Try not to worry about fluctuations, just keep investing. And invest at least enough to obtain the companies highest matching percentage. Do this and retirement will be very secure.
2007-03-23 00:50:13 · answer #3 · answered by Lone Papa 2 · 0⤊ 0⤋
It's better to have a balanced portfolio. You are young. You could probably go agressive if you have the ability to leave it alone and not look at it for 10 years. If you stress over it, you will keep changing it and that is NEVER good. You are always behind the trends that way.
2007-03-22 22:22:22 · answer #4 · answered by Anonymous · 0⤊ 0⤋
go from 60/40 to 70/30 stocks.
not sure of your choices.
stocks are good for the long haul.
domestic, intl, small, large, etc.
main thing is to put away as much as possible pre-tax.
2007-03-23 00:03:30 · answer #5 · answered by Anonymous · 0⤊ 0⤋