4. Position Investment for Growth
Overly conservative investments can be just as dangerous as overly aggressive ones. They expose your portfolio to the erosive effects of inflation, limit the long-term upside potential that diversified stock investments can offer, and can diminish how long your money may last. On the other hand, being too aggressive can mean undue risk of losing money in down or volatile markets.
An investment strategy (asset mix) that seeks to balance growth potential and risk (return volatility) may be the answer. You should determine—and consistently maintain—an asset mix that reflects your investment horizon, risk tolerance, and financial situation.
The sample target investment mixes below show illustrative blends of stocks, bonds, and short-term investments with different levels of risk and growth potential. With retirement likely to span 30 years or so, you'll want to find a balance between risk and growth potential.
Consider diversification: Build a diversified mix of stocks, bonds, and short-term investments, according to how comfortable you are with market volatility, your overall financial situation, and how long you are investing for. Doing so may provide you with the potential for the growth you need without taking on more risk than you are comfortable with. But remember: Diversification and asset allocation do not ensure a profit or guarantee against loss.