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Each investor has a target asset allocation and that will change over time. Personal changes, net worth fluctuations, an approaching retirement and many other factors will end up playing an important role in how you want your portfolio to look. The more you need the money that you have invested, the less you can afford to lose which means a safer asset allocation.
I consider that US investors would without any doubt have the following asset classes:
-Domestic Stocks
-Foreign Stocks
-Bonds
International investors would have a minimum of 4:
-Domestic Stocks
-US stocks
-International excl. US
-Bonds
Any portfolio that has $10-15K or less would probably focus entirely on these asset classes. When adding additional ones, it would simply mean a more precise split:
-International Stocks would become:
-EAFE
-Emerging Markets
And bonds would become:
-Corporate Bonds
-Government Bonds
-International Bonds
Here are some examples:
Investor #1 (retired) being the most conservative and Investor #10 being very aggressive (very young)
Simple US Investor Portfolio
Domestic Stocks Foreign Stocks Bonds
Investor 1 10 0 90
Investor 2 15 0 85
Investor 3 20 0 80
Investor 4 25 5 70
Investor 5 30 10 60
Investor 6 35 15 50
Investor 7 40 20 40
Investor 8 45 25 30
Investor 9 50 30 20
Investor 10 55 35 10
Simple Foreign Investor Portfolio
Domestic Stocks US Stocks Foreign Stocks Bonds
Investor 1 5 5 0 90
Investor 2 7.5 7.5 0 85
Investor 3 10 10 0 80
Investor 4 12.5 12.5 5 70
Investor 5 15 15 10 60
Investor 6 17.5 17.5 15 50
Investor 7 20 20 20 40
Investor 8 22.5 22.5 25 30
Investor 9 25 25 30 20
Investor 10 30 30 30 10
More Complex US Investor Portfolio
Domestic Stocks EAFE Emerging Markets Corporate Bonds Government Bonds International Bonds
Investor 1 10 0 0 40 50 0
Investor 2 15 0 0 40 45 0
Investor 3 20 0 0 40 40 0
Investor 4 25 2.5 2.5 35 35 0
Investor 5 25 7.5 7.5 30 30 0
Investor 6 30 10 10 25 25 0
Investor 7 35 12.5 12.5 20 20 0
Investor 8 35 20 20 15 10 0
Investor 9 35 22.5 22.5 10 5 5
Investor 10 35 25 25 5 5 5
More Complex Foreign Investor Portfolio
Domestic Stocks US Stocks EAFE Emerging markets Corporate Bonds Government Bonds International Bonds
Investor 1 5 5 0 0 40 50 0
Investor 2 7.5 7.5 0 0 40 45 0
Investor 3 10 10 0 0 40 40 0
Investor 4 12.5 12.5 2.5 2.5 35 35 0
Investor 5 12.5 12.5 7.5 7.5 30 30 0
Investor 6 15 15 10 10 25 25 0
Investor 7 17.5 17.5 12.5 12.5 20 20 0
Investor 8 17.5 17.5 20 20 15 10 0
Investor 9 17.5 17.5 22.5 22.5 10 5 5
Investor 10 17.5 17.5 25 25 5 5 5
As time goes by you could add income stocks, alternative asset classes, and even more. We will provide a number of portfolio examples that you could use to start off with.
