Choosing your asset mix is step 4 to investing. The right asset mix should:
- help balance risk with your expected rate of return on your investments,
- fit your tolerance for risk,
- let you to get your money when you need it,
- help provide the growth you need to reach your goals, and
- change as your needs and goals change over time.
Why the right asset mix is important
By holding a mix of investments from the 3 main asset classes – cash and cash equivalents, equities and fixed income investments – you can get a fairly well-diversified portfolio. Deciding how much of your portfolio to invest in each asset class is called asset allocation.
Your asset mix will largely determine the risk and expected return of your portfolio. To get the right mix for you, be sure that your asset mix matches your risk tolerance, financial goals and time horizon.
If you need help putting together an asset mix, you may want to work with an adviser.
To learn more about asset mix, watch this video.
Changing your asset mix over time
As your financial goals and needs change, you will likely want to review – and possibly change – your asset mix. Here are a few examples.
If you’ve just started your first job
You may not have a lot of savings and you may be paying off student debt. But you may also have more time to reach some of your financial goals. At this stage of life, you may be willing to take more risks with your long-term investments.
For tips on investing in your 20s, watch:
If you’re more established in your career
You’ll likely be earning more. And your financial goals will likely have changed. You may be paying down a mortgage, and saving for a child’s education or for your retirement. At this point, you may be interested in a mix of higher- and lower-risk investments.
As you approach retirement
You might want to start shifting into lower-risk investments. Protecting your savings may become more of a priority because you’ll need to live on your investments after you retire. You may also want to look into investments that create a steady, reliable stream of income.
Watch this video for tips on investing as you approach retirement.
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