Q. I plan to retire in 20 years. Currently all my investments are in stocks. When should I start adding non-stocks to my portfolio?
A. Generally, if your risk tolerance level is high, you can wait to consider changing your current investment strategy until you have about 10 years to retire.
Another sign that you should consider diversifying your current all stocks portfolio is, if your projected retirement income level will be high enough, you do not have to take too much risk anymore, you can start reducing your exposure to stocks.
By adding non-stocks to your investment portfolio, you might give up some upside, but it will do you well if a market crash like the 2008 crash ever happens again. Because if you keep all your investment in stocks, you might lose a substantial amount of money in a very short amount of time. Or worse, if you experience other disastrous events for job or family reasons, the situation will be exacerbated.
With a diversified portfolio, your hit will be much less severe in those situations, and even better, your can rebalance to profit from the market crash.
A. Generally, if your risk tolerance level is high, you can wait to consider changing your current investment strategy until you have about 10 years to retire.
Another sign that you should consider diversifying your current all stocks portfolio is, if your projected retirement income level will be high enough, you do not have to take too much risk anymore, you can start reducing your exposure to stocks.
By adding non-stocks to your investment portfolio, you might give up some upside, but it will do you well if a market crash like the 2008 crash ever happens again. Because if you keep all your investment in stocks, you might lose a substantial amount of money in a very short amount of time. Or worse, if you experience other disastrous events for job or family reasons, the situation will be exacerbated.
With a diversified portfolio, your hit will be much less severe in those situations, and even better, your can rebalance to profit from the market crash.
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