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Thursday, March 3, 2011

Rule of 100 - Portfolio Diversification

To know how much of your portfolio should be invested in stocks vs. bonds/CD/other safer investments, you can use the simple rule of 100. What you need to do is subtract your age from 100. For example, if you are 25: 100-25=75. You should have 75% of your portfolio invested in stocks and 25% in bonds, etc.

Of course, if you want to be more aggressive, you can invest more money in stocks or the other way around. If you want to be safer, you can invest more money in bonds and CDs. However, the rule of 100 can provide a basic guideline.

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