Mutual fund asset allocation portfolios

Your Asset Allocation Determines How Risky Your 3 Fund Portfolio Will Be

Your split between domestic stocks, international stocks, and bonds will determine how risky your portfolio is. The more bonds you have, the less risk you’ll be taking. We love the advice shared by John Bogle, founder of Vanguard, in his incredible book, with regards to this topic. For younger investors, he recommends investing 80% in stocks and 20% in bonds. He drops this down to 70% stocks for older investors (45yrs +). For those already retired, a split of 60% stocks to 40% bonds might make more sense. Ultimately, these are only rough guidelines, and you will need to decide what works best for you. If you have a long investment horizon and are less risk- averse, having 95% of your investments in stocks

might be right for you. It’s a personal decision that must be made with your investment goals in mind. Think about how you’d react if you were to lose 40% of your portfolio in a short period of time due to a market downturn like in 2008 / 2009. If you think you might panic and sell everything then perhaps having more bonds would help settle your mind (and stomach). Asset Allocation Pro-Tip: If you decide to invest using only 1 target-date fund, don’t just choose a fund based on your retirement date. Look into the % of the fund allocated to bonds and decide if that’s the mix you feel comfortable with. If you have a target-retirement date of 2045, but like

the allocation of the 2055 retirement-date fund better, then go with that. They are usually pretty good at picking the right year, but it’s always best to double-check. After all, this is your future we are talking about.

Okay, so now that you have a pretty good background on this, what are the options when it comes to investing in a three fund portfolio? The three funds are just your first step. In order to really take advantage of this, you need to figure out your three fund portfolio asset allocation. Meaning, what percentage of your investment money are you going to invest in each of the assets you choose? There are plenty of variations and what you choose is personal. Remember, investing is based on your goals, timelines, amount of money you

have now, age, etc. So there is no perfect answer, but there are some variations you can consider below.

with less volatility than individual asset classes Download this Client-approved presentation (PDF) * Putnam Dynamic Asset Allocation Balanced Fund (AAB) * Large-cap growth equities (LCG) * Small-cap growth equities (SCG) * Large -cap value equities (LCV) * Small-cap value equities (SCV) * International equities (IE) * U.S. bonds (AGG) * Commodities (Comm.) * U.S. TIPS (TIPS)


Mutual Fund Asset Allocation Portfolios

Types Of 3 Fund Portfolios Choosing Your Asset Allocation

The most effort you need to exert when setting up this lazy portfolio is deciding the level of capital to allocate to each of the asset classes (or funds). This topic is hotly debated, but there are a few basic options to be aware of. Obviously, you are not limited to the three examples below, but they are a good start to building a balanced portfolio.


Figure 1 Franklin Small Mid Cap Growth Fund Portfolio Asset Allocation

Mirae Asset Emerging Bluechip Fund Portfolio Allocation And Market

Mirae Asset Emerging Bluechip Fund usually maintains an allocation of 30%-40% to large-caps. However, over the past few months, the scheme has gradually hiked the large-cap exposure to around 55%. Mid-and small-caps in the past ranged between 50%-65% of the assets. In the past 12 months, this exposure has dropped to under 45%. Small caps, which once made up 15% of the portfolio, are down to 6%. The mid-cap exposure stands at 37%, dwon from a peak of nearly 50% in the past year. The

cautious stance of the fund house is clearly visible. The fund is moving out of volatile mid-caps and shifting to stable large-caps.

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