How would the asset allocation differ between a 25 year-old who is
The stock-to-bond ratio for an investor is a personal decision and should be based on the individual’s risk tolerance, time horizon, and financial goals. Generally speaking, investors with shorter time horizons and lower risk tolerances should allocate more to bonds than stocks. Conversely, investors with longer time horizons or higher risk tolerances can afford to take on more stock market volatility and thus may want to increase their allocation towards equities. The following are some examples of reasonable stock to bond ratios for different types of investors:
Conservative Investor: 35% Stocks/65% Bonds
Moderate Investor: 40% Stocks/60% Bonds
Aggressive Investor : 45 % Stocks / 55 %Bonds
For a conservative investor the majority of their portfolio should be allocated towards less volatile investments such as bonds in order minimize any unexpected downturns from unpredictable market movements . As moderate investor one could gradually increase allocations (5%) relative neighboring portfolio structure adding mix other instruments varying degrees making sure stay within comfort zone still maximize returns available given current circumstances .. Lastly aggressive type leaning heavily into uncertainty high yields through stocks requires greater deal discipline precaution ensure practice diversified approach minimizing overall downside chance catastrophic failures happening.