Today I'd like everyone to welcome Mike from The Financial Blogger. Mike's main focus on his blog is teaching the best way to control yourself and your money at the same time. Frugality isn't a bad word and in this lesson you'll learn some pretty good tips. Please enjoy the article and let your voice be heard in the comments.
If You Are Young, You Should Invest the Biggest Part of Your Portfolio into Stocks
There is an old rule saying that to determine the portion of stocks to be held in your portfolio, you simply have to take the number “100” and deduct your age. Therefore, being 27, I should hold 73% of my portfolio in stocks and only 27% in bonds and other fixed incomes. This old rule of thumb is based on the fact that the more you age, the less time you have to recuperate from a market drop.
Technically, this rule is not stupid as you should maintain a high percentage of stocks when you are young since it has been proven that stock markets perform over the long term (read more than 15 years). However, there is something stronger than rationality: emotions.