Equity Allocations & Risk

CED203E4-4D68-4E38-9273-DE3394E2A636Financial author William Bernstein offers this very enlightening graph of equity allocation and risk tolerance in his much recommended book, “The Four Pillars of Investing.”

I’ve recently written in a previous blog posting found here:

“Most financial advisors use an investor’s AGE as a basis for asset allocations (younger investors hold more stocks, older investors hold more bonds for safety and income). I don’t agree with this methodology, even younger (20-something) investors can become very nervous and anxious in a market correction.

My belief is to allocate your assets based on your risk tolerance. Invest in equities only up to the point where market volatility doesn’t concern you. If this means only a 30% allocation to stocks helps you sleep at night, that should be your limit.”

The Bernstein graph coupled with my reasoning here should provide my blog readers with something of significance to ponder.

If you find your holding too heavily tilted to equities/stocks, one might want to use this rally to lighten up and raise some cash.  Just saying….

 

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