A moderate allocation model — in
which you invest about 50% to 70% of your portfolio in
stock and stock mutual funds — can help you balance
some of the volatility of
stocks with the more reliable income provided by bonds
and cash equivalents. The trade-off is that this approach
will probably not provide the same level of growth in the
long term as a more aggressive strategy.
A moderate allocation plan might be appropriate for investors
who want to buffer short-term volatility in their portfolios,
need to balance near-term and long-term financial goals,
and have less than 10 years until retirement.
If you're not a risk taker by nature but are willing to
tolerate some volatility in your portfolio, a moderate
allocation model may be suitable in almost any circumstance
or financial situation.
And keep in mind that what might be considered a moderate,
or even conservative, approach at 25 years of age — say
70% stocks, 20% bonds, and 10% cash — would be quite
an aggressive approach by the time you reach 60.
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates 
