Determining how much money to invest in stocks depends on your time horizon -- and your gut. An all-stock portfolio may make you jumpy. If so, add an investment-grade bond fund, such as Harbor Bond. (You can put more into a bond fund to tone down any of the following portfolios.) But long-term investors will do best with virtually all their money in stocks. This portfolio is designed for investors who are at least five years from retirement or at least ten years from needing their money for any other goal. (The shorter horizon for retirement savers assumes you won't need all your money immediately upon retiring.)
You'll need $13,333 to copy this portfolio exactly.
You can reduce the minimum needed for this portfolio and those that follow by buying through a discount broker. Or you can start with just a couple of funds and add the others as you accumulate more money.
Medium-term | Nearing retirement or other goals
When you're within five years of retirement, you need to trim your sails. This portfolio is also ideal for investors who will need their money within five to ten years for any other goal, such as college. It includes 20% in bonds.
After the market cataclysm of years past, putting so much of your money into stock funds may seem about as sensible as sticking your arm in a lion's cage. But historically, over five-year periods, stocks have beaten bonds four times out of five and have made money 90% of the time.
This portfolio adds bond funds to temper its volatility. Loomis Sayles Bond (800-633-3330) is about two-thirds in high-grade bonds and one-third in riskier, high-yield bonds. If you're in the 27% tax bracket or higher, you'll probably net more after taxes with Vanguard Intermediate-Term Tax-Exempt (800-635-1511).
Minimum to copy this portfolio: $25,000.
Short-term | When you need your money soon -- or now
Even when you retire, you can be too cautious. This investment mix is for investors in the early years of retirement, up to about age 75, and anyone else whose goal is five or fewer years away. You can spend 4% to 5% of your initial retirement investment, plus inflation, annually without fear of outliving your money. In retirement, you should also keep two years' expenses in a money-market fund or bank account. If you're investing for goals other than retirement, once you have less than three years to go, gradually sell your stock funds.
Harbor Bond (800-422-1050) is less risky because it sticks to higher-quality and shorter-maturity IOUs. Harbor is run by Bill Gross of Pimco Investment Management, who has one of the best long-term records of any bond manager.
Minimum to copy this portfolio: $25,000.
Updated January 2005
