Risk Assessment, The Wealthy Janitor, Part 3

October 18, 2007 · Filed Under ·  

Wealthy Janitor, Part 3Part 3 - How Much Risk To Assume. Investing in stocks, by nature, carries with it more risk than investing in bonds. When I started investing in my retirement account, I remember asking my friend, “the wealthy janitor”, should I invest my money more in stocks or bonds? I was in my late 20’s, a newbie to the whole investing thing and searching for advice. I came home and immediately wrote down what he said, “Kyle, you should be more invested in stocks because you have a long time until retirement and can take on more risk.” He went on to tell me that as I young person with over 30 years until retirement, I can handle the ups and downs of the stock market since I am invested for the long term and not short term gains.

Cool Trick To Determine Your Diversification

I found a cool trick on CNN Money.com that helps you determine how much of your retirement portfolio should be in stocks and how much should be in bonds. What you do is subtract your age from 120. At 33 years old, my number would be 120-33 = 87. This means I should have 87% of my retirement portfolio in stocks and 13% in bonds. This is a good rule of thumb. Part 4 in a few days!

Check out all of ‘The Wealthy Janitor’ series:

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Comments

One Response to “Risk Assessment, The Wealthy Janitor, Part 3”

  1. Mrs. Micah on October 18th, 2007 4:19 am

    It’s true. My estimate is a bit more conservative towards bonds, say 20%.

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