Fill two baskets

  When you start to fund your savings vehicle, it's a good idea to keep your risk tolerance in mind. Stocks and stock mutual funds carry more risk and thus will fluctuate more in price than a bond, Treasury note, or bank deposit. Filling two saving baskets makes it easy to manage your risk tolerance for these two investment categories. Fill your basket with only stocks, and you might not have enough to retire due to a market crash. Fill your basket with only bonds and CD's, and your savings might not grow fast enough to retire when you want to. Fill two baskets and you can control the volatility of your portfolio. I prefer a half/ half approach. If you can handle more fluctuation and want the potential for higher returns, a 70% stocks/30% bonds allocation may work for you. If you can't stand seeing your investments move up and down, a 20% stocks/80% bonds allocation might be best. The decision rests with you. As your tolerance changes, you can move assets between baskets. See you next time, Finwiz.