Quote:
Originally Posted by alnorth
If your time horizon is less than 10 years (sounds like it might be, since you are talking about maybe needing money?) then I agree, you should not be in stocks. At least not all in stocks.
If your horizon is longer than 10-15 years (and mine is, I dont care what happens, I'll go BK before I touch my retirement), then you probably should have at least a large chunk of stocks and just ignore the news.
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The general rule of thumb these days is to take 110 less your age and that should be your allocation to equity, with the rest to fixed income (bonds). So if you are 50, you should be 60% stock and 40% bonds. You can move that up or down 10% based on your personal risk preference.
I also stay away from "stylized" mutual funds (funds that try to beat a certain benchmark like the S&P 500, DJIA, ec). Stats show that over 80% of those types of mutual funds actually perform worse than the competing benchmark over time. I like index funds that mimic things like the S&P 500, Russell 300, FTSE, etc for that reason and index funds have extremely low expense percetanges (less than 0.25%).
One of the keys, as it has always been, is spread around your money as much as you can. Invest in different types of equity (small cap, mid cap, large cap, income, growth). Invest in international funds if available. If you are lucky and can invest in emerging markets (Brazil, Russia, China, etc), even better. The thought being is that it is rare that everything will go down or up at once so it's good to be all over the board. I still cringe when I hear people that are 100% invested in their company stock for their 401k.