Many people know that they need to invest in a combination of stocks and bonds, but they don't know which combination of stocks and bonds is most suitable for them and best suits their investment style and investment goals. Today we are going to talk about this topic.
To find out the best stock-to-bond ratio for you, you can first ask yourself two questions:
What is the duration of my investment? Or how long will the money not be used?
How much drawdown can I afford to lose?
Professor Siegel of the United States has calculated: if you hold the ** index for 1 year, then there is no difference between the size of the dice and dice betting, and it is basically to make money by luck; If you hold the ** index for 5 to 10 years, the risk will be significantly reduced, and the certainty of return will be higher and higher; If you hold it for more than 20 years, at any time**, you are unlikely to lose money. It can be seen that the longer our investment period, the greater the possibility of profitability, and the higher the proportion of ** assets; On the contrary, the shorter the investment period, the lower the probability of profit, and the smaller the proportion of ** assets.
In addition to the investment horizon, the second factor to consider is risk tolerance. If you want to get higher returns, you have to take on more volatility. There is no such thing as the best investment strategy in the world, but there is one that works best for you. Matching your risk tolerance is the most suitable investment strategy for you. Generally speaking, if you want to get an annualized rate of return of 5% and 7%, you basically don't need to bear too much volatility, the combination of stocks, 1 bonds, and 9 can be realized, and the maximum drawdown is generally not more than 3%, and you can basically make a steady profit if you hold it for more than 1 year. However, if you want to make higher returns, the associated drawdown risk is doubled. In general, for every 1% increase in annualized return,* the risk of drawdown increases by more than 5%. In other words, if you want to get an annualized return of 10%, you must be able to withstand a drawdown loss of about 20%. As the saying goes: as many beatings you can bear, you can eat as much meat as you can.
In addition, your risk tolerance is also closely related to your age. Subtract your age from 100 to get the percentage of assets you are currently suitable to hold. For example, if you are 20 years old this year, the ** asset ratio can reach 80%, because you are young, you can be more aggressive; If you reach the age of 40, ** assets should not exceed 60%, in order to prevent a mid-life crisis, the ratio of 6 stocks and 4 debts can create a second income for yourself in addition to wages, which is equivalent to an extra guarantee; At the age of 60, ** assets should not exceed 40%, at this time it is not important whether the assets can increase in value, value preservation and liquidity are the key, whether you can have a happy old age, depends on how much stable cash flow you have.
Finally, a brief summary:
If the investment period is more than 10 years and can bear a drawdown loss of 15% and 20%, you can share 6 bonds 4, or stock 7 bonds 3;
If the investment period is 5 10 years, and can withstand a 10% 15% drawdown loss, you can stock 4 bonds 6;
If the investment period is 2 to 5 years, and it can withstand a drawdown loss of 5% and 10%, you can stock 2 bonds 8, or stock 3 bonds 7;
If the investment period is 1 2 years and can withstand fluctuations of about 3%, you can stock 1 bond 9;
If the investment period is less than 1 year, then go to buy currency**, because no one can guarantee that ** will not fall sharply within 1 year, investment is not gambling, and safety is the first priority.