When it comes to investing, there is no one-size-fits-all approach. The ideal portfolio allocation for each investor depends on their risk tolerance, investment time horizon, and financial goals. Generally speaking, investors can choose between an income portfolio or a growth portfolio. An income portfolio is designed to generate current revenues and consists primarily of dividend-paying stocks and coupon-generating bonds.
This type of portfolio is suitable for investors who are comfortable with minimal risk and have a short to medium investment time horizon. However, please note that depending on the account, dividends and refunds may be taxable. On the other hand, a growth portfolio is mainly composed of stocks that are expected to appreciate in the long-term, taking into account potential large short-term price fluctuations. This type of portfolio is suitable for investors who have a high risk tolerance and a long-term investment time horizon.
The old rule of thumb used to be that you should subtract your age from 100, and that's the percentage of your portfolio that you should hold in stocks. For example, if you are 30 years old, you should keep 70% of your portfolio in stocks. If you are 70 years old, you should keep 30% of your portfolio in stocks. Ultimately, the ideal portfolio allocation for each investor will depend on their individual circumstances and financial goals.
It is important to consult with a financial advisor to determine the best approach for your specific situation.