Let Your Investments Resemble You

Every financial advisor has their own stock/bond allocation chart given a person's age. So if you were 20 years old, they might have you investing 80% of your portfolio in stocks with a large percentage in small cap. If you were 50 years old, that stock allocation might be reduced to 40-50% with an emphasis in large cap companies. While these might seem all well and good, there is a problem with the idea as a whole. Did you know that for those who are retired or who are getting ready to retire lost about 30% of their portfolio in the past year? Although that may have beaten the market, that doesn't quite seem like the optimal return to me when you are about to stop working.

Portfolio allocations have to resemble yourself. Are you a risktaker? Do you prefer dividends for yourself or R&D to grow the company? Are you investing in things you know or in things your advisor knows? One portfolio model does not work for everyone. Many people have gone to see an advisor and have had their portfolio dramatically changed. But did that advisor really know them or what they like? Obviously you do not want a portfolio full of risk when you are older and reaching retirement. However, some people do want to spend a little money on those small cap 'make or break' stocks. If you are set for retirement, you might not want any stocks at all. You have to do what is right for yourself. With the market as far down as it is, now might be the time to relieve yourself of bonds and swallow more stocks. If your portfolio is as far down as everone else's, then you might want to invest mainly in stocks to get that optimal return. Then again, are you a risk taker? You have to invest in yourself and the way you do things if you want to make cash money. Don't let anyone tell you otherwise. No one knows you better than yourself.