Asset Allocation: Aggressive Vs. Conservative

by Dual Income No Kids on July 28, 2009 · 0 comments


Hi All,

Okay. So, this posting is following on the topic of asset allocation. At this point I am assuming that you’ve figured out how much risk you are willing to take and are curious about how you should be allocating your money.

Well, here are some breakdowns of what a reasonable asset allocation is. These numbers should be taken as a starting place. They aren’t optimal for everyone. They’re just a good blueprint that you can have a discussion about.

A) For Aggressive Investors
– These will usually be persons who are in younger, have good careers and are living within their means.

Fixed Income: 0 to 15%
Equities: 60 to 80%
Alternatives: 15 to 35%

B) For Conservative Investors
– Conservative investors are often seniors, persons who have limited sources of income or are in poor health. It also includes persons who don’t like or who can’t afford a lot of portfolio risk.

Fixed Income: 35 to 55%
Equities: 20 to 40%
Alternatives: 15 to 35%

C) For Moderate Investors
– Moderate investors are typically persons who are neither conservative nor agressive investors. Usually moderate investors are persons with a new family or those in young middle age (e.g. persons in their late 30s to late 40s).

Fixed Income: 15 to 35%
Equities: 40 to 60%
Alternatives: 15 to 35%

For more on asset allocation consider checking the Wikipedia entry. Its got a discussion of relevant scientific research on this topic. This is important as a lot of popular literature on asset allocation tends to be somewhat muddled.

Best,

James

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