Asset classesThis depends on what you want from your investment and the amount of risk you are willing to take. It is important to remember all of these assets can form part of a healthy portfolio.
Deciding on the right mix of equities, bonds and property to hold depends largely on the level of risk that you are prepared to take. If you’re willing to take more risk in order to generate a higher level of income from your investment, your portfolio would probably lean more towards equities.
If it’s more important to you to have a secure investment and you are comfortable with earning a little less income, or perhaps you’re not at a stage in your life where you want to take risks with your hard-earned nest egg – maybe you’re approaching retirement – you may want to increase the percentage of bonds you hold. The general rule of thumb is that the percentage of bonds should be the same as your age. For example, if you’re 58, approximately 58% of your portfolio should be made up of bonds. If you’re 65, then approximately 65% should be in bonds, and so on.
As none of the asset classes are free from risk, it could make sense to reduce the risk to your investment by holding a combination of bonds and equities. That way you can add some degree of stability if stockmarkets fall. Please note that prices of equities and bonds may fluctuate and you may not get back your original investment.
