Selecting the right asset mix

In an instant

  • Your investment goals, the time required for the money, and the risk tolerance should determine your target asset mix.
  • Each asset class – stocks, bonds and cash – plays a different role in a balanced portfolio.
  • Once you know your target asset mix, you can choose personal investment to keep your portfolio.

One of Vanguard’s core investment policies is to create clear, appropriate investment goals. For example, your goal may be to save for retirement. That goal, along with your time frame and risk tolerance, determines your target asset allocation – the ideal mix of stocks, bonds and cash in your portfolio.

Your goal resource mix is ​​like a bull’s eye: zero in on it, stay focused and eliminate distractions so you can reach your goal.

Here is some information to help you choose your target asset allocation.

Start with your goals, deadlines and risk tolerance

Before you choose a goal asset allocation, ask yourself the following questions to determine these 3 things:

1. Your goal.
What am I investing in? Am I saving for retirement or a down payment at home? It is possible to have multiple goals, but it can be easy to focus on one at a time.

2. Your deadline.
How much time do I need to invest before investing? Consider how you plan to raise money. Will you take all the money at once (for down payment in one house)? Or can you extend your withdrawal period by several years (such as withdrawal from a retirement account)?

Your deadline affects the amount you need to save to meet your goals. Suppose you want a ডাউন 10,000 down payment in 6 years. If you open an account with 100 and earn an average annual income of 6%, you’ll need to save about $ 114 a month for 6 years to reach $ 104. All other reasons being equal, if you want the same down payment in just 3 years, you need to save more than 250 250 per month.

Note: This hypothetical example does not represent a return on any particular investment and the rate is not guaranteed.

3. Your risk tolerance
What is my comfort level with the unknown? Generally, stocks are more risky than bonds, and bonds are more risky than cash.

Your target asset allocation should include a percentage of stocks, bonds and cash. A portfolio with 90% stocks and 10% bonds puts you at greater risk – but potentially gives you a higher return than a portfolio with 60% stocks and 40% bonds.

More info: Make a plan to reach your goal

Understanding asset class Each asset class responds differently to market movements. Keeping investments from everyone reduces your overall risk, which means your portfolio will be in a better position to weather the ups and downs of the market. The percentage you invest in each asset class may be the most important factor in determining the short and long term risks and returns of your portfolio.

Asset class Designed for Features
Stock Increase When you buy a stock, you become partial owner of the company. If the company does well, you will usually benefit. If not, you may lose money.
Bond Income and stability When you buy a bond, you are paying the issuer money when they agree to pay for the bond to arrive on its due date. In return for the loan, you pay regular interest.
Money Security Use cash to save for short-term or emergency use. There is minimal risk that the price of your investment will fluctuate in response to market conditions. The value of your money will not increase significantly, but you can expect to earn some income in the form of interest.

In the long run, you can see how different asset classes (in a diverse portfolio worldwide) have responded to market movements:

100% bond

Risk Historical Risk / Return (1926-2018)
Average annual income 5.3%
Best Year (1982) 32.6%
Worst Year (1969) –8.1%
Years with losses 14 of 93

50% stock / 50% bond

Risk Historical Risk / Return (1926-2018)
Average annual income 8.2%
Best Year (1933) 32.3%
Worst Year (1931) –22.5%
Years with losses 18 of 93

100% stock

Risk Historical Risk / Return (1926-2018)
Average annual income 10.1%
Best Year (1933) 54.2%
Worst Year (1931) –43.1%
Years with losses 26 of 93

Comments: Which indicator to use and for what period to determine, we have selected the indicator that we have considered as a fair representation of the characteristics of the referenced market that we are currently seeing.

For US stock market returns, we use the Standard & Poor’s 90 Index from 1626 to March, 1757; S&P 500 Index from March 4, 1957 to 1974; Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) from 1975 to April 22, 2005; MSCI US Broad Market Index from April 2, 2005 to June 2, 201 through; And then the CRSP US Total Market Index.

For U.S. bond market returns, we use the S&P High Grade Corporate Index from 1926 to 1968; Citigroup High Grade Index from 1969 to 1972; Lehman Brothers US Long Credit AA Index from 1973 to 1975; Bloomberg Barclays US Aggregate Bond Index from 1976 to 2009; And Bloomberg Barclays US Aggregate Float Adjusted Index.

For US short-term reserves, we use the Ibotson US -0-day Treasury Bills Index and the Citigroup-Month US Treasury Bills Index from 1 to 1226.

More info:
What is stock?
What is a bond?
What is cash?
Vanguard portfolio allocation model

Find your goal Our Investor Questionnaire, which you can complete in about 5 minutes, can help you find a suitable target asset allocation. Once you get the results of your questionnaire, you can open an account and choose individual stocks, bonds, mutual funds and ETFs (exchange-traded funds) to create a portfolio that matches your target asset allocation. You can partner with a financial advisor to create a professionally managed, customized financial plan to help you reach your goals.

More info:
Investor Questionnaire
Partner with an advisor
Start by allocating your resources


All investments are at risk, including the potential loss of money you invest.

Diversity does not guarantee gain or protect from loss. Be aware that fluctuations in financial markets and other factors can reduce the value of your account. There is no guarantee that any specific asset allocation or combination of funds will meet your investment objectives or give you a certain income level.

Past performance is no guarantee of future income. The performance of an index is not an accurate representation of a particular investment, as you cannot invest directly in an index.

You must buy and sell Vanguard ETF shares through Vanguard Brokerage Services (we are free of those commissions) or through other brokers (which may charge a commission). See Vanguard Brokerage Service Commission and Fee Schedule for complete information. Vanguard ETF shares are not redeemable in any way other than the merger of millions of dollars worth directly with the issuing fund. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or accept the current market price, which may be less than the net asset value.

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