Rabble-Rouser: Your Asset Allocation


LV Critical Lesson: This is an ideal asset allocation for someone who is in her 20s and saving for retirement or another goal that is 20+ years away.

RED FLAG: Your situation should be in the same ballpark as the above ideal. If it’s not, consider retaking the LV Investing Goals & Risk Tolerance Quiz. Remember, a certain amount of risk is necessary to reach your goals.

With this asset allocation, if you have $5,000 to invest,  it would break out the following way (we’ll cover this more in Day 11 of Investing Bootcamp):
Rabble Rouser

As a bit of a refresher:
Large Cap stocks include very large American companies like Apple and General Electric.

Small/Mid Cap stocks include smaller American companies, like Chipotle or Revlon. You may see some big swings in funds that invest in small/mid cap companies, but you should also see higher returns over time.

International stock includes non-American companies of all sizes (small-, mid- or large-cap). That can mean a company in a developed country like Germany (Volkswagen) or a company in a country whose economy is still emerging, like Korea (Samsung). International investments can be risky for many reasons, but having some in your portfolio is a great way to protect against risk with American companies. It adds to your diversification!

Bonds are generally safer investments, but offer lower returns as a result. Instead of buying a part of a company in the form of stocks, these funds lend money to the company in return for interest payments.

in an investment portfolio is just another way to diversify against risk.

  • Colleen

    What a great breakdown.  This is so easy to understand!  Can’t wait to get closer to my goals.  Thank you, LearnVest!

  • anon

    The example above does not equal $5K!!! Backup to rule #1 “Make sure you get advice from someone who has basic math skills”