Rule #5 of Investing

When we get to Rule #5, we assume a savings plan is in place and we have converted a frivolous spending habit into real dollars. Credit card debt is zero or in decline. After much reading and study, we are convinced of the importance of asset allocation. If you made it this far as a reader, you are in the process of escaping the “dark side” of investing and that is, you are no longer influenced by the multi-billion dollar industry called Wall Street. While I do not deny there are stock investors who do quite well picking individual stocks to build their portfolios, and operate without a single thought given to asset allocation, research is replete with data showing the odds are against the average investor who operates without an investment plan.  We highly recommend you develop a portfolio plan and we are here to help.  Many times it only requires a few questions on your part.

Rule #5 is one of turning the concept of asset allocation into some specific decisions. In the table below you will see the asset allocation plan for three operating portfolios. Note that SCV = Small-Cap Value, MCG = Mid-Cap Growth etc. The beginning investor may use six to eight of these asset classes while someone with a larger portfolio will want to use ten to twelve asset classes. More on this when we get to a later rule of investing. These are only example asset allocation guidelines.  We use specialized software to design portfolios.  Silver and Gold members receive this help as a bonus for their subscription.

Asset Classes and Percentage Allocations

Asset Class Bohr Curie Schrodinger
Large-Cap Value 6% 6% 10%
MCV 7% 8% 10%
SCV 7% 8% 8%
Large-Cap Core 1% 3% 0%
Large-Cap Growth 5% 5% 9%
MCG 5% 5% 8%
SCG 5% 5% 5%
Bonds 15% 5% 15%
International (Dev.) 15% 15% 15%
REITs 14% 10% 10%
Emerging Mkts. 15% 15% 10%
Commodities 5% 5% 0%