
Behold, the fool saith, ‘Put not all thine eggs in the one basket’—which is but a manner of saying, ‘Scatter your money and your attention’; but the wise man saith, ‘Put all your eggs in the one basket and—watch that basket.’.…….Mark Twain.
What part of ‘don’t put all your eggs in one basket’ isn’t clear? Putting all or most of your money into one stock is gambling, not investing…..[2002 Washington Post 23 May E3]
Asset allocation is a time-proven strategy that can help take the guesswork out of choosing investments for your portfolio.
Instead of putting all your eggs in one basket, you spread your eggs (dollars) among a variety of baskets (stocks, bonds and cash). The baskets can be further divided within each type of investment.
Although many investors understand that they should invest in a variety of securities, they often stumble when it’s time to choose an asset allocation that’s right for them. The allocation that you choose should be based on how much risk you are willing to assume, why you are investing and when you will need to tap your investments.
However, in some cases, once investors choose their allocation, many are afraid to change it. As you experience changes in your life, it can be appropriate to redistribute your assets.
So, when should you change your asset allocation? It is important to maintain balance in your portfolio. Accordingly, you should reevaluate your allocation strategy at least once a year or when you experience a major life change such as marriage or the birth of a child. It is not always necessary to make a fundamental change to the allocation, but you need to make that evaluation on a regular basis. (more…)