How should I divide my investment (bonds/equity)?

What percentage of my investment do you think i should have in bonds if any at all at this time?

Common wisdom is that bonds add stability to ones investments. Also common wisdom is that as one grows older one should increase ones exposure to bonds. If you check out Fidelity's Life Cycle funds you will notice that the further out funds have fewer bond investments. The closer in funds have greater bond investments. The concept behind this notion is that bonds are more stable investments and provide a safer source of income. People who had stocked up on bonds during the late 70's and then watched them loose 1/2 their value during the early Regan years may have some arguement with that notion. People who invests in the aaa rated Woops bonds may also. They lost everything when the Washington supreme court ruled that the state of Washington had no obligation to pay the bonds.

Investments have risk, one of which is inflation and another of which is devaluation of the local currency, which has been happening steadily to the dollar. Equities are somewhat insulated from inflation and foreign equities can protect somewhat against the later as can foreign bonds.

A little of this and a little of that is a good investment policy. It eliminates specific risk.

It depends on your age and your goals. If you're young, then you can get away with being more agressive and having less in bonds and more in stocks. If you're getting closer to retirement, then you're better off to play it a little safe.

Diversification in Investment purely depends on your Age & Risk Appitate.

Age <25 : 70% Equity, 20% Mutual Funds, 10% Bonds
Age 25-40 : 50% Equity, 30% Mutual Funds, 20% Bonds
Age >40 : 40% Equity, 40% Mutual Funds, 20% Bonds


I hope this break-through is good enough for taking calculated risk.

I always felt 50:50 is a good ratio.

And at the present situation its better a 75:25 ie..Equity: Bonds ratio

I would say fifty/fifty, but then again it all depends on how much risk u are willing to take. How old you are. and what type of returns you are looking at. Bonds are safe with slow returns, but equities are subject to market risk and can double, tripple your investments overnight.

Hi, I'm Sean Toh from Singapore. Great to hear that! You are thinking hard for your investment. Why do I say that? At least you bother to take some responsibilities over your investment. Most people will just give it to others to plan for them. If they found the right people, good lucks for them. When they found the wrong people to help them invest, their hard earned money is gone because they don't take responsible steps and try to understand what they are investing in. For your question. What percentage to put in bonds and what percentage to be put in equity? Here are the steps to help you if you encounter a good financial advisor and that are some questions he/she will ask..

Sean's Trigger Question 1. What is your time horizon for this investment objective?

Case 1 : Why is this question so important? If you have a long time horizon like 30 years and may be you are only 34 years of age, you could put more percentage in equity because you have enough time to ride the ups and downs of the stock market and if you are disciplined to put a fixed amount of money for this investment - technique called dollar cost averaging. In the long run, you will win the game.

Case 2 : if you are near to retirement, you should put more in bonds to preserve the money as you will need the money soon. Putting more in bonds has it's shortfall. You get less returns for your investment. However, small returns like 3 % cannot beat inflation but if you have a large sum of money, you still get lots of money out of it.

Conclusion : Time is money.

Sean's Trigger Question 2 : What is your risk factor scale?

Case 1 : Jenny can invest $10,000 in this investment. That does not affect her as she understand what she is investing in. In the long run, time will make money for her. She sleeps well, enjoys working hard and plays whenever she can.

Case 2 : Jane invest the same $10,000 as Jenny in the same investment instruments. Everytime, there is a drop or flunctuation in the market index, she is horrified and can't sleep and work. Nor even play.

Conclusion : What is your risk profile? Are you going into an investment that will cause you to lose sleep? Do you understand what you are investing in?

Sean's Trigger Question 3 : How much money are you investing in this investment?

Case 1 : John believe that this is a well planned investment portfolio. He is disciplined to set 70% of his income into this investment every month after paying off all the expenses and bills. Investment went wrong. How is it going to affect him?

Case 2 : Jonny believe that this is a well planned investment portfolio. He is disciplined to set 45% of his income into this investment every month after paying off all the expenses and bills. He also set 25% of his income for an emergency fund by saving it in one of his saving account.

Conclusion : You need to invest but you also need to set some emergency fund too.

There are too many questions to ask yourself because you know whay are your needs better than me. Excellent efforts for taking the first step to responsible investing. Click the links below for more resources.

Yours Sincerely
Sean Toh
Author of Four Steps To Financial Freedom

If you are under 50 100% equity, 50 to 60 35% bonds 60+ 50 to 60% bonds.

Remember always bonds are lousy investments but they are more or less stable and do provide steady income. Something you will rely on when you are retired.

What is your age? What are your goals? Impossible to answer without the above + tax bracket; living circumstances; children; etc. vegas_iwish@yahoo.com

100% equity. even if you are very conservative you can find equities with very little downside risk that pay dividends equal or higher than bonds. with equity you have upside potential, not with bonds. for the conservative part of your portfolio, get into REIT's utilities, banks. They are all paying good dividends. Sure they may go down a little, but over the long run they will out-do bonds.

60% equity 40% bonds