
You've probably heard the saying before: Don't put all your eggs in one basket, and you may even laugh when you hear it, but it is very true. The number one rule in building an investment portfolio of any kind must be to build a balanced and diversified portfolio. There have never been more tools available to the investor to help balance their portfolio than there are today.
How do you go about beginning to build a portfolio that is balanced? You must first understand your individual situation financially. There is no one right answer to what is the right amount of equities versus fixed-income or any other type of asset class. If you are a college student with lots of years ahead of you, an aggressive portfolio with a large amount of equities makes a lot of sense. If you are near retirement and expect to be needing the money soon, bonds and CD's should be a large part of your portfolio.
It is important to understand the risk and reward of each investment you make. Stocks have far more risk than bonds, but usually return a far higher percentage in the long run. Money market funds usually don't pay a high interest rate, but they are the most liquid and least risky of investments.
I personally like to recommend an overweight on equities to those who are in the younger age group, but they must also remember to keep the equities diversified. No one should have a portfolio of all speculative stocks, especially in a retirement portfolio. The first rule of a retirement account must be to preserve capital. Mutual funds make good investments in retirement accounts, especially those who have a long track record of success. At this time, with some CD's returning 5.3 or 5.4% over a 1 year period, it seems to me that CD's should be the pick over bonds, but that could change at any time. ![]()
Diversifying your retirement account through equities, mutual funds, CD's, and bonds will help you build a nice nest egg to retire on. The sooner you get started in building a balanced retirement portfolio the more you will benefit in the long run.






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