Asset Allocation: Getting It Right
Did you know that having the right mix of investments is one of the most important factors in determining your investing success?
The investments in your plan generally fall into one of three basic asset classes: short-term reserves, bonds, and stocks. How you divide your money among these investments is known as asset allocation. The key to asset allocation is finding an investment mix that fits your financial goals, time frame, and comfort level with risk.
Risk Versus Reward
When deciding how much risk you can handle, consider the length of time you have to invest. The longer you have to invest, the more risk you may want to consider, because you have more time to ride out short-term market losses in hopes of greater long-term returns.
By mixing different types of investments, you can come up with the combination of risk and potential return that's right for you.
Here's a look at the asset classes and their risks.
Need Help With Your Investment Strategy?
Complete Vanguard's Investor Questionnaire. The questionnaire will lead you to a suggested investment mix based on your risk tolerance, goals, and time frame. It's available online at www.vanguard.com, or by calling Vanguard® Participant Services at 1-800-523-1188.
©2007 The Vanguard Group, Inc. All rights reserved. Used with permission.