Investing is a series of trade-offs. Every one of us has a finite amount of money, and we must determine how much we want to put where. Placing a large portion of our money in stocks means we might have tremendous upside potential, but it also means we won’t be able to put a lot of money in the cash and bonds that help stabilize some of the ups and downs of stocks. Placing all our money in cash and bonds might not get us the growth we need to meet our financial life goals.
Determining how much to put in stocks versus bonds is a vital decision, one that your financial advisor can help you make with confidence. And the trade-offs don’t stop there. There’s a multitude of asset classes underlying the broad categories of stocks and bonds, and the decisions that we make in selecting each of those asset classes could be the difference between achieving our goals or falling short. Fortunately, there is a sizable body of industry and academic evidence that we can rely on to make informed decisions about these trades-offs.