Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Thursday, April 15, 2010

DIY Newbie - Step1 (cont.) - asset allocation

Ok...we're back at the asset allocation tool you played around with yesterday.  Let's first have a look at some of the categories:
1. Stocks:  large cap, mid cap, small cap, foreign stock.  Large cap are  large companies, mid cap middle size companies etc.  Another tool: when confronted with a term you are not sure about (for example "mid cap") or for which you want more info, use investopedia .  Adding the percentages for these categories, using the assumptions I have put in the allocation tool, gives me 68%.  This is the recommended stock allocation.

Stocks represent the more volatile part of a portfolio.  As we'll see, this is where historically the best performance has come from over long periods of time.  Generally, the younger you are, the greater you want your exposure to stocks to be.  For a  90-year-old, the allocation tool (and  hopefully his financial advisor) will recommend a fairly small percentage investment in stocks.

2. Income:  bonds, municipals, and cash.  This category is generally referred to as bonds, fixed income or just income, as we have labeled it here.  When I add these categories, I get 32%.  The income portion of the portfolio is less volatile than the stock portion.  As you age, you will increase your exposure in bonds.  With the allocator tool, run the age up to 90 and watch the purple slice grow!

Asset allocation is, as I mentioned yesterday, a very important determinant of long term performance.  There is an ongoing academic debate about how important it is, but nevertheless everyone agrees it is very important!

The bottom line is that it is very easy to use an online calculator to get at an asset allocation.  We'll look at the calculator in more detail in the next post.


  1. The bankrate asset allocation tool looks like a good place for the beginning investor to start. Ric Edelman also has a GPS on his site ( that after asking the investor a series of questions provides a recommended portfolio allocation.

  2. thanks for the newbie posts. i will have to add "investopedia" to my bookmarks next to Wikipedia.

  3. I'm going to look at Edelman's GPS again. I looked at it some time ago and wasn't impressed for some reason I can't recall. I'll get back to you.
    For the newbies I just want to show them some questions they need to consider, then discuss risk tolerance and finally show them how to look at their 401(k) offerings and choose appropriate funds. If I can end up with simple instructions on how to rebalance then I will have accomplished my goals.
    I believe there are a lot of fairly useful tools online but it is a challenge to understand how to use them and especially how to put them together.