Allocation Lesson for Traditional Investment Accounts

Reallocating your investment portfolio is something that should be done atleast annually, but probably every six month at a minimum.

A good friend of mine is a successful financial advisor and he told me that they always reallocating their clients portfolio when warranted, which basically means when the allocation percentages get out of wack due to the increase (or decrease) of a given asset class.

50/50 Allocation

He told me that they automatically rebalance their clients portfolios to 50/50 continuously. Meaning, 50% of an account in invested in different stocks and the other 50% is in fixed assets, such as bonds.

Most people have a 60/40 or even 70/30 allocation of stocks to bonds. It’s super risky and, yes may be great when the stock market is going up, but when we inevitably pull back….look out below.

So the irony is he and his partners have literally had to defend the 50/50 allocation in the past few years as technically they are under-performing the broad market by just a little.

However, over the long term this allocation will outperform the others time after time. In fact, the ideal allocation from all the research I have read is 35/65…yep even less in stocks then they are doing.

Over the course of 30 years (basically the investing life of a working career) it has shown to outperform based on historical data and studies.

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