Please read the article and provide a one-paragraph comment on this article. To see how asset allocation works in the real world, here are retirement scenarios for three different investors. Investor A: 22 years old, 40 years to retirement, high risk tolerance This investor is interested in growing their retirement savings over the next 40 years. They know the market will have ups and downs but are more interested in holding investments that will offer the potential for a higher rate of return. They want a diversified portfolio that allows them maximum exposure to the stock market and its historically high rates of return. Their retirement investment portfolio might look like this: 80% stocks 40% large-cap stocks 30% mid-cap stocks 30% small-cap stocks (Links to an external site.) 15% bonds 5% cash Investor B: 40 years old, 15 years to retirement, moderate risk tolerance This investor still has more than a decade to go until retirement but less time to recoup any major market losses. They’re willing to take on some risk to keep their money growing but don’t have the luxury of multiple decades to replace any money they might lose between now and retirement. They want a diversified portfolio that will offer modest upside but still protect them from major market downturns. Their retirement portfolio might include: 60% stocks 60% large-cap stocks 20% mid-cap stocks (Links to an external site.) 20% small-cap stocks 30% bonds 10% cash Investor C: 60 years old, beginning retirement now, low risk tolerance This investor is celebrating the end of their working years and looking forward to using their retirement savings to explore new horizons. Losing money really isn’t an option since the money they’ve already saved needs to last for the next 20 or more years. They want a diversified portfolio that helps preserve their capital while offering them selected opportunities for upside—but without taking on a lot of risk. Their retirement portfolio might look like: 30% stocks 100% large-cap stocks (Links to an external site.) 50% bonds 20% cash As you can see, differing time horizons and appetite for risk dictate how these investors choose to allocate the assets in their portfolios. While these profiles are only samples, they should give you an idea of how asset allocations can change from one risk tolerance and time horizon to another.
Please read the article and provide a one-paragraph comment on this article.
To see how asset allocation works in the real world, here are retirement scenarios for three different investors.
Investor A: 22 years old, 40 years to retirement, high risk tolerance
This investor is interested in growing their retirement savings over the next 40 years. They know the market will have ups and downs but are more interested in holding investments that will offer the potential for a higher rate of return. They want a diversified portfolio that allows them maximum exposure to the stock market and its historically high
Their retirement investment portfolio might look like this:
- 80% stocks
- 40% large-cap stocks
- 30% mid-cap stocks
- 30% small-cap stocks (Links to an external site.)
- 15% bonds
- 5% cash
Investor B: 40 years old, 15 years to retirement, moderate risk tolerance
This investor still has more than a decade to go until retirement but less time to recoup any major market losses. They’re willing to take on some risk to keep their money growing but don’t have the luxury of multiple decades to replace any money they might lose between now and retirement. They want a diversified portfolio that will offer modest upside but still protect them from major market downturns.
Their retirement portfolio might include:
- 60% stocks
- 60% large-cap stocks
- 20% mid-cap stocks (Links to an external site.)
- 20% small-cap stocks
- 30% bonds
- 10% cash
Investor C: 60 years old, beginning retirement now, low risk tolerance
This investor is celebrating the end of their working years and looking forward to using their retirement savings to explore new horizons. Losing money really isn’t an option since the money they’ve already saved needs to last for the next 20 or more years. They want a diversified portfolio that helps preserve their capital while offering them selected opportunities for upside—but without taking on a lot of risk.
Their retirement portfolio might look like:
- 30% stocks
- 100% large-cap stocks (Links to an external site.)
- 50% bonds
- 20% cash
As you can see, differing time horizons and appetite for risk dictate how these investors choose to allocate the assets in their portfolios. While these profiles are only samples, they should give you an idea of how asset allocations can change from one risk tolerance and time horizon to another.
Source: Forbes.com
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