Determine Your Investment Risk
Are you a conservative with your investments or one who like to takes risks? In this volatile market it's a wonder every investor doesn't have their money buried in their backyards or hidden under their mattresses. The Dow Jones has literally dropped in half ever since the economy started to take a nosedive. So many have lost so much and it doesn't appear things will improve any time soon. Granted President Obama has made efforts to revitalize the economy with the new stimulus package, it will still take a fair amount of time before we begin to see the positive effects it's meant to accomplish. Until then, we're going to have to endure this recession for the time being.
Statistically speaking, you should not lose money on any investment over a 15 year span. Experts agree 15 years should allow enough time for your investments to survive any market fluctuations. However, there are many who are preparing to retire within the next 5-10 years and if you're one of those who have lost a fair amount of your future retirement income, you're probably hoping for a recovery before that time comes. Sadly, I've known individuals who have literally gambled with their investments so close to retirement only to come up way short of the amount they need to sustain a comfortable living for the rest of their lives.
Although I'm not trying to scare anyone I am trying to get you to take a look at your goals and objectives as they relate to your personal situation. If you're still years away from retirement, chances are you're fine with higher risk investments. If you're nearing retirement age, it might be wise to consider safer, more conservative choices. The following model is one I use for my personal investment strategy:
Years to Retire 30 plus Stocks 90% Bonds 10% Money Market 0%
Years to Retire 25 Stocks 80% Bonds 20% Money Market 0%
Years to Retire 20 Stocks 70% Bonds 20% Money Market 10%
Years to Retire 15 Stocks 60% Bonds 20% Money Market 20%
Years to Retire 10 Stocks 50% Bonds 30% Money Market 20%
Years to Retire 5 Stocks 40% Bonds 35% Money Market 25%
Years to Retire 0 Stocks 30% Bonds 30% Money Market 40%
Again, evaluate your own investment risk to determine the best approach for your personal needs. If you're within 5-10 years of retirement, I would suggest speaking with a qualified financial advisor.
