Asset allocation is a cornerstone of sensible long-term investment, but it’s something many private investors struggle to get their heads around. One idea, courtesy of The Oblivious Investor, is to think of it like the food pyramid many of us learned at school.
The key thing to understand is you want to have more of the assets at the bottom of the pyramid and fewer of those at the top.
Exact percentages will depend on your age and risk profile. For example:
- A young investor would want more long-term exposure to equities
- A retired investor living off their income would typically have shifted much of their equity funds into fixed income
All very sensible, though if I could afford a Monet I’d be tempted to head to the top of the pyramid early. Waterlillies are so much prettier than share certificates!
Filed under: Investing
