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Asset Allocation For Retirement: Understanding Stocks And Bonds

One of the most common questions in investing is regarding the right asset allocation. The answer truly depends on your needs, risk tolerance and ultimately your financial goals, both now and in the future. While there are quizzes and questionnaires you can take online, and you can always ask your friends and family what they do, it’s better to understand the differences between the asset classes and then transpose that over your goals.

Start With Stocks

What you have allocated in equities and stocks would refer to your risk or growth asset. Stocks, at the most basic level, mean that you own shares of publicly traded companies. Over time, you’d expect that these assets would grow faster than both bonds and inflation rates. However, these are more volatile assets. While you may expect returns around 8 to 10% annualized, they’re subject to -30% years and +30% years. Historically speaking, his asset class is up.

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