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Individually Allocated Portfolio Guide
Individually Allocated Portfolio Guide
We have outlined four steps to assist you in your investing journey:
Step 1
Determine Percentage Allocated to Asset Classes
The first step in creating a strong portfolio is to choose the right percentage of your investment to allocate for each major investment class (stocks, bonds, mutual funds and cash equivalents).
Asset allocation is different for everyone and is based on individual risk profiles and goals. The models we outline below are general guides to give you an understanding of how you may want to allocate your investing based on your risk level:
Age Group: 75 & Over
Risk Level: Very Conservative
Asset Allocation:
- 15% Stocks
- 0% Bonds
- 85% Cash equivalents
Objective:
- Liquidity
- Predictable income
- Very small growth element
Age Group: 66 – 75
Risk Level: Conservative
Asset Allocation:
- 37% Stocks
- 12% Bonds
- 51% Cash equivalents
Objective:
- Liquidity
- Income and capital preservation
- Growth element to align with inflation
Age Group: 56 – 65
Risk Level: Moderate
Asset Allocation:
- 58% Stocks
- 20% Bonds
- 22% Cash equivalents
Objective:
- Equal emphasis on growth and preservation
- Strong diversification
Age Group: 46 – 55
Risk Level: Aggressive
Asset Allocation:
- 80% Stocks
- 20% Bonds
- 0% Cash equivalents
Objective:
- Long-term growth
- Little concern for capital preservation and liquidity
Age Group: 45 & Under
Risk Level: Very Aggressive
Asset Allocation:
- 100% Stocks
- 0% Bonds
- 0% Cash equivalents
Objective:
- Long-term growth
- No concern for capital preservation or liquidity
Step 2
Choosing Appropriate Mix of Asset Classes
The next step is to determine which specific mix of assets you want in your portfolio.
Diversification is key, not just with balancing stocks, bonds and cash equivalents, but also with types of funds. Below we highlighted some ways of breaking down asset percentage for your reference.
Age Group: 75 & Over
Risk Level: Very Conservative
Asset Allocation:
- 15% Stocks
- 0% Bonds
- 85% Cash equivalents
Asset Breakdown:
Stock: (15%)
- 4% Foreign value stock
- 4% Foreign growth stock
- 4% Large-cap stock
- 3% Small-cap valueStocks: (15%)
Cash and equivalents: (85%)
- 85% Stable value
Age Group: 66 – 75
Risk Level: Conservative
Asset Allocation:
- 37% Stocks
- 12% Bonds
- 51% Cash equivalents
Asset Breakdown:
Stock: (37%)
- 19% Large-cap stocks
- 5% Foreign value stock
- 6% Foreign growth stock
- 6% Small-cap stocks
Bonds: (12%)
- 12% High-quality bonds
Cash and equivalents: (51%)
- 51% Stable value
Age Group: 56 – 65
Risk Level: Moderate
Asset Allocation:
- 58% Stocks
- 20% Bonds
- 22% Cash equivalents
Asset Breakdown:
Stock: (58%)
- 29% Large-cap stocks
- 10% Foreign value stock
- 9% Foreign growth stock
- 5% Small-cap value
- 5% Small-cap growth
Bonds: (20%)
- 20% High-quality bonds
Cash and equivalents: (22%)
- 22% Stable value
Age Group: 46 – 55
Risk Level: Aggressive
Asset Allocation:
- 80% Stocks
- 20% Bonds
- 0% Cash equivalents
Asset Breakdown:
Stock: (80%)
- 40% Large-cap stocks
- 13% Foreign value stocks
- 13% Foreign growth stocks
- 7% Small-cap value
- 7% Small-cap growth
Bonds: (20%)
- 20% High-quality bonds
Age Group: 45 & Under
Risk Level: Very Aggressive
Asset Allocation:
- 100% Stocks
- 0% Bonds
- 0% Cash equivalents
Asset Breakdown:
Stock: (100%)
- 43% Large-cap stocks
- 18% Foreign value stock
- 17% Foreign growth stock
- 11% Small-cap value
- 11% Small-cap growth
Step 3
Choosing Specific Funds
Schedule a One-on-One Meeting to Get Started.
One of the key benefits of your CRA plan is personalized retirement counseling. If we can help, just let us know.
Now choose which specific funds you want to include in your portfolio.
As we mentioned in other resources, fund selection is exceptionally complicated. No one can tell you how a specific fund is going to perform in the future. Generally, it’s best to focus on long-term growth and a diversified portfolio comprising funds that track the whole market.
Self-directed brokerage
If you wish to invest in funds not included in the CRA menu, check out our Self-Directed Brokerage option through Schwab PCRA.
This alternative provides access to most publicly traded mutual funds, and virtually any publicly-traded stock or bond, as well as additional investment vehicles.
You may invest up to 90% of your account(s) assets through this option (the greater of $2,500 or 10% of your total 401(a) or 457(b) account balance must remain in core CRA funds). For complete information regarding the self-directed brokerage account, speak with one of our CRA retirement counselors.
There are certain guidelines that many experienced traders analyze when picking stocks and bonds:
This is a financial ratio widely used by investors and analysts to determine stock valuation. It shows a company’s stock price in relation to its earnings per share, or EPS. This information is often used to determine if the stock is overvalued or undervalued in relation to an industry group or a benchmark index like the S&P 500. It indicates what the market is willing to pay for a stock based on past or future earnings. A low P/E is an indicator that the stock is undervalued, while a high P/E ratio may mean the stock is overvalued.
It is important to assess the company’s income statement, balance sheet and cash flow statements. Those statements will allow investors to determine how much revenue is coming in, the net profit and if the expenses outweigh the income. Also, those reports indicate how many assets and liabilities the company has and their ability to pay back debts.
As an added bonus, many companies also pay dividends. This is a cash payout to investors and is potentially a sign of good financial health.
Step 4
Maintaining Assets
Now that you have a portfolio, you will need to manage it over time.
The best strategy is to focus on long-term performance and not monitor each fund daily or make changes often. However, keep an eye on overall market trends, and periodically (such as once a year) rebalance your portfolio to ensure that asset classes are aligned with your objectives.
If you are uncomfortable choosing your own investment allocation, check out one of CRA’s target date portfolios. These are a series of automatic asset allocation funds that are designed and managed by professional investment advisors.
