Are You Being Too Aggressive?

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Are You Being Too Aggressive?

How aggressive you should be with your investments depends on three things:

• Your investment goal—how much money you’ll need
• Your investment horizon—how long you plan to invest for the goal
• Your ability to handle volatility

To find out whether your current portfolio is too aggressive for your goals, use an online asset allocation tool.

If you find that you’re more than likely to meet your goals given your current portfolio, or you find that your portfolio is far more volatile than you thought, consider ways to make your portfolio more conservative.

Alter your asset mix

You can do plenty of things to damp your volatility. The most significant move: reducing your stock investments and increasing your position in cash and bonds.

Many financial professionals argue that your blend of cash, stocks, and bonds contributes more to your portfolio’s return and volatility than what investment styles you practice, what sectors you have exposure to, and what individual securities you choose.

While we believe all of these factors play important roles in your volatility and return, we agree: Asset allocation is huge. And the less of your portfolio you have in stocks and the more you have in bonds and cash, the more sedate your portfolio’s performance will be.