Looking for Guidance on Formulating a Well-Balanced Investment Plan

Kelly Gloria · Sep 15, 2024 · 19 replies

Hello Everyone,

Although I’ve read a lot about the benefits of maintaining a varied portfolio to reduce risk, I’m not entirely sure how to balance my assets. I now have a combination of stocks, bonds, and cash because I’m relatively new to investing, but I’d like to improve my strategy.

While I’ve heard about a number of strategies, such as the 60/40 rule (60 percent equities and 40 percent bonds) and age-based allocation changes, I’m interested to know what has been most successful for other members of this group. How do you go about diversification, particularly in the erratic market of today? Is it better to concentrate more on index funds or may individual equities still have a role in a diversified portfolio?

I would be very grateful for any advice, materials, or experiences that could assist me in developing a more reliable and comprehensive investing plan. Growth over the long run and reducing possible losses over time are two things that really fascinate me.

Thank you in advance.

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19 Comments

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jimbow13

2 years ago

The intent with my input is not to add comments/advice that are not applicable, so hopefully my suggestion to insure your success (sorry for the pun!) with term life insurance in case your well thought out plan goes awry, is ok.

I believe this matters mainly if you have dependents/spouse and want to make sure they are taken care of in case you die early.

I did this and am grateful. While I don’t need the policy now, if my lung cancer diagnosis had come when I was younger, not having it would have been a big problem for my kids and wife.

JGarrett

2 years ago

some of questions I ask to make these decisions

What do I not need to touch in 10 years–that is the equity portion
What are emergency funds–need 100% liquidity and safe, non equity and non bond funds
What are bills I will be paying in 1-2 years……that is set aside also into safe, non equity and non bond funds….money market or something like that
what are funds that I could afford to lose 100%….those are very high risk (much riskier than S&P 500) investments. For much of my life, that number was $0!
I don’t try to ever time the market. Any equity investments are for the very long term…meaning 10 years or more.. I believe trying to time the market is fruitless.
With publicly traded equity investments, I focus only on index funds. Active funds or stock picking do not impress me.
Finally, within the public equity portion of my portfolio, I attempt to diversify my geographic risk. I diversify greatly outside the US equity market. And I know the US has done quite well compared to other sectors. But the US is now 60% of the world market. See the historic record of Japan.

I find the “% cash, equity, bonds” portfolio resultant makeup is a fall out when the questions are answered above.

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Jonathan Clements

2 years ago

Reply to JGarrett

This is a great set of guidelines. Thanks for posting.

William Perry

2 years ago

In your request for materials I would suggest the following as a start-

The writings of Adam Grossman who has been a fixture in the articles on Humble Dollar and also posts on his own Company website.
One of his free e-books – Seven Steps to Financial Success is a quick and meaningful read.
I also think Richard Ferri’s book (2010) All About Asset Allocation, second edition would be one of the first books I would want to read early if I was starting my financial education from scratch.

Jonathan’s 2018 best selling international book How to Think About Money is a wonderful read. If I could only have read one of his financial books this would be the one.
I hope this helps.
Best, Bill