One of the biggest (if not the biggest) determinants of how well your investment portfolio does is how you divide your assets into various investment vehicles. What percentage do you need in cash, stocks, bonds, real estate, and so on? It's a difficult question to answer for many. But in this piece, let's simplify the process into four rules for asset allocation. They are:
Rule No. 1: If you need the money in the next year, it should be in an interest-bearing savings or money market account.
Rule No. 2: If you need the money in the next one to five (or even seven) years, choose safe, income-producing investments such as Treasuries, certificates of deposit (CDs), bonds, bond funds, income funds or balanced funds.
Rule No. 3: Any money you don't need for more than seven years is
a candidate for the stock market.
Rule No. 4: Always own stocks. Even if you're at or near retirement age, stocks can help your portfolio beat the debilitating effects of inflation. In a growing economy, do a buy and hold approach for high quality growth scripts.
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