Do you really know how to split your retirement savings up in the best way? Chances are probably not. Trying to figure out the best asset allocation for your money design is something we refer to often here on my blog. Why? Because there of all the millions of combinations of investments we could put together, how do know which ones will work? What are the best asset allocation models for us to follow?
I have been asking this question since I started investing and am still looking for the answer. We all know that in order to save up for a healthy retirement you’ve got to choose the right funds to stuff inside our investment portfolio. Choose poorly and your money will slip away from underneath your feet. Choose wisely and you’ll enjoy a full retirement with plenty of safety.
Solin’s Investment Portfolio Recommendation:
Normally we could use the classic Rule of 110 where you take your age, subtract it from 110, and you’ve got your percentages for stocks and bonds. Although this is helpful, most investors will need more specific guidance.
Today’s recommendation comes from a book I recently read called The Smartest Retirement Book You’ll Ever Read by Daniel R. Solin. In Part 2, Solin makes stock picking extremely simple for us – he tells us not to do it! Instead, Solin decisively thinks we should go with low cost Vanguard index funds. He feels this is a better route due to their superior returns, low cost, better diversification, tax advantages, and the nature of their low cash holdings.
In Chapter 5, Solin gives us a very simple investment portfolio consisting of the following:
1. Total Stock Market Index Fund (VTSMX)
2. Total International Stock Index Fund (VGTSX)
3. Total Bond Market Index Fund (VBMFX)
Here are Solin’s asset allocation models arranged by risk:
Return History from Solin’s Asset Allocation Models:
If you’re interested in seeing how each of these portfolios performed over the years, Solin provides data for each in Appendix B:
Readers – What do you think of this simple investment portfolio advice? What other asset allocation models do you usually follow?
Photo Credit: freedigitalphotos.net, “The Smartest Retirement Book You’ll Ever Read”