Age

Bonds are considered a conservative investment because, generally, neither the potential gains or the potential losses as as great as with stocks. The more time you have to invest toward your retirement, the more time you will have to accumulate money and make up for possible losses along the way. Consequently, experts suggest that younger investors adopt a more aggressive strategy if they are comfortable with it. This means that you will invest little or no money in bond funds in order to take advantage of higher yielding products like domestic and international stock funds, real estate funds, natural resources funds and others. As you get older, your strategy will change toward protecting your assets, and bond funds will become more prominent in your portfolio.

Other Accounts

When creating an asset allocation, it is important to look at the whole picture. If you have other retirement accounts, such as a traditional IRA, a Roth IRA or an old 401k from your previous job, consider the allocations and the balance between stocks and bonds across all the accounts. You may need to adjust one or all accounts to arrive at the desired allocation in your whole retirement portfolio.

Risk Preference

References

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