Where the Pros Stash Their Own Dough, Part 3

Here's part 3 of a piece from Money that reveals the secrets used by several investment pros when handling their own money:

I act like I'm a child.

How much of your money should you put at risk in the stock market? A Vanguard life-cycle fund targeted for 2015 retirees has about a 50 percent stock-50 percent bond allocation, and its fund for 2025 retirees has about 60 percent of assets in stocks.

But the 51-year-old Sauter, Vanguard's chief investment officer, is more aggressive. He has 82 percent of his portfolio in stock funds.

"A lot of people become conservative a bit early," he says. "With life expectancy increasing, I expect to live quite a while. And my money needs to be growing in the asset class that I expect to have the greatest return."

I'm heavily into stocks myself -- probably 95% or more of my portfolio is in stocks or stock mutual funds. I expect to live quite a while myself. ;-)

Click here to read part 4 of this series.

Comments

[Mike]

When it comes to investing for my retirement I am 100% in stocks because I feel that is the best way to reach my goals. I guess the true test will be to see how willing I am to stick with this model portfolio over the next 50 years.

[Dale]

Asset allocation should always be driven by two things. First, how soon do you need the money? The answer to that question is not the same for every dollar. And there are several factors that can change it including your age, target retirement date, how much you have saved, the size of your cash reserve, etc.

Second, how much risk can you tolerate? This question is not entirely independent of the first one. Money you need to withdraw sooner should be invested in something less volatile. You don't want to sell at a loss solely because of short-term needs. However, the greater your assets and the greater your capacity to add to them, the more risk you can take with a portion of your portfolio.

I know I'm preaching to the choir here. However, the point I'm driving at is that age-based asset allocation assumes that your answers to all of the other questions about your financial situation are typical for your age.