Stock and Bond Question -?

Imagine that you have just come into a large sum of money. Being a responsible adult, you want to invest a portion of that money into stocks and bonds to save towards your eventual retirement. The projected returns are 6% for the bonds and 10% for the stock fund. You have decided that you want to put at least 30% of the investment into the bond fund. You also have decided that you want a mix of stocks and bonds that will enable you to realize a total return of at least 7.5%. What would you do?

use algebra.
x= portion invested in bonds y= portion invested in stocks
.06x +.10y = .075
x + y = 1

x=.635
y=. 375

That proportion will yield a probable return of 7.5%
However with only 30% invested in bonds the probably return is

.3 x .06 + .7 x .10 = .088 or 8.8%

So I would invest at least 30% in bonds and possibly as much as 63.5% in bonds.

However, if I came into a large sum of money I would retire immediately rather than wait. Bond and stock yields are not constant. They vary considerably over time.

IF you came upon a large sum of money, you should consult an independent financial adviser.

With only or little more than the fee you paid for that advice and service, he/she should be working with you and in your best interest, for suggesting stocks, bonds, commodities, indices ["indexes"], mutual funds, etc.

I've been doing Y! A over 7 months. Although those answering have good intent and want to help, when it comes to financial matters and advice, I discovered over and over and over again, the majority of folks answer in terms of what they heard or picked up from one obscure place or another.

You'll also notice the greatest majority don't list any "Source".

Thanks for asking your Q! I enjoyed answering it!

VTY,
Ron Berue
Yes, that is my real last name!

Do the math and buy the appropriate amount of stocks and bonds. P.S. Your plan is sound but like all plans, they can go haywire so keep a close track. Buy more bonds instead of stock as you get closer to retirement.