Asset allocation for fund investors

A moderate strategy for "Ethel Equilibrium"
5 of 7

A moderate asset allocation strategy involves a higher allocation to stocks than does a conservative strategy. Stocks are generally more risky than bonds for a few reasons.

"An equity is a security which is a residual claim on the assets of a firm. If there is a bankruptcy, other folks get paid before the equity owners. In exchange for coming last in line, there is potentially more upside," says Farr.

Upsides of stocks include possible dividend payments and increases in share price, also called capital appreciation.

To find the best mutual funds for your allocation plan, Mladjenovic recommends first determining the appropriate category and then filtering down the choices from there.

"People often choose the (fund) that is just in the wrong category," he says. He cites an example in which an adviser put his client's college fund into an Internet stocks fund.

"I thought it was a ghastly decision," he says. "In that fund, they could have chosen the greatest Internet stocks in the world, but it was too great a risk," says Mladjenovic.

When evaluating actively managed funds (as opposed to index funds), compare their cost, management tenure and their performance relative to their peers and benchmark.




Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

Where should I put my money?

Dear Dr. Don, I would like to begin investing money to use in retirement. I want to be conservative with these investments, and I don't know where to begin. Any advice on retirement investing would be appreciated. Thank... Read more



Dr Don Taylor

ETFs in retirement accounts

The availability of ETFs in retirement accounts gives investors access to a wider array of investments, but not all choices are appropriate in these accounts.  ... Read more

Partner Center

Connect with us