Asset Allocation Examples

 

1. Simple Asset Allocation Example (Stocks/Bonds):

Asset Allocation Percentage
Global Equities 75 %

U.S. Stock Market

55 %
International Stocks

20 %

Global Fixed Income 25%

U.S. Bonds

20 %
International Bonds

5 %

2. More Detailed Asset Allocation Example (Stocks/Bonds):

Asset Allocation Percentage
U.S. Stocks* 60 %

S&P 500 (Large Cap)

40%

Mid-Cap

10%

Small Cap

10%

International Stocks 20 %

Developed Market Stocks

13%
Emerging Market Stocks

7%

Fixed Income 20%

U.S. Bonds

12%

International Bonds

5%

High-Yield (Junk) Bonds

3%

*This example is overweight mid-cap and small-cap, and underweight S&P 500, since the S&P 500 makes up approximately 80% of the U.S. total stock market capitalization.

3. Asset Allocation Example Adding Gold/Commodities:

Asset Allocation Percentage
U.S. Stocks** 60 %

S&P 500 (Large Cap)

47%

Mid-Cap

9%

Small Cap

4%

International Stocks 18 %

Developed Market Stocks

12%
Emerging Market Stocks

6%

Fixed Income 15%

U.S. Bonds

10 %

International Bonds

3%

High-Yield (Junk) Bonds

2%

Gold/Commodities 7%

**This allocation approach for U.S. stocks is closer to tracking the total U.S. stock market index than the second example above.  This approach allows for rebalancing between large, mid-, and small-cap stocks, but one could pursue a similar approach by purchasing a total U.S. stock market index or ETF, if there is no desire or need to rebalance based on U.S. market cap size.

4. Asset Allocation Adding Real Estate (through Real Estate Investment Trusts (REIT) ETFs or Index Funds):

Asset Allocation Percentage
U.S. Stocks 60 %

S&P 500 (Large Cap)

40%

Mid-Cap

10%

Small Cap

10%

International Stocks 14 %

Developed Market Stocks

8%

Emerging Market Stocks

6%

Fixed Income 12%

U.S. Bonds

7%

International Bonds

3%

High-Yield (Junk) Bonds

2%

Gold/Commodities 7%
Real Estate 7%
U.S. Real Estate (REIT EFT or Index Fund)

5%

International Real Estate

2%

 5. More aggressive asset allocation example: This example increases allocation to equities, including small-cap; emerging market stocks; and high-yield bonds.

Asset Allocation Percentage
U.S. Stocks 65%

S&P 500 (Large Cap)

40%

Mid-Cap

10%

Small Cap

15%

International Stocks

15%

Developed Market Stocks

5%

Emerging Market Stocks

10%

Fixed Income 10%

U.S. Bonds

3%

International Bonds

2%

High-Yield (Junk) Bonds

5%

Gold/Commodities 4%
Real Estate 6%

U.S. Real Estate (REIT EFT or Index Fund)

4%
International Real Estate

2%

Note: The above examples are overweight U.S. assets based on percentages of the total global markets that U.S. markets represent.  The author is a U.S. citizen and admittedly biased toward U.S. equities, fixed income, and real estate.  While the U.S. stock market has outperformed other international markets historically, every investor should be aware of the potential (likelihood) of home market bias and the potential benefits of diversifying internationally.

 

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