A young investor needs to diversify beyond US stocks
Q: I'm 29 and have a $100,000 portfolio invested mostly in large-cap stock mutual funds and a bit in US Savings Bonds. I'd like to be more aggressive but don't have the means to continually invest. Should I stay put? Or is there a smart way to be more aggressive?
M.K., Jamaica Plain, Mass.
A: Gone are the days of placing money in a large-cap US equity fund, closing your eyes, and hoping for the best.
As the world becomes more connected and global, your investment portfolio must do the same, says William Buechler, president of Barclay Partners Asset Management, in La Jolla, Calif. And that means moving beyond the large-cap fund.
At your age, you have a 30-40-year time frame for your investments. Therefore, Mr. Buechler suggests that you allocate 25-30 percent of your portfolio to the international markets. Of that amount, 60 percent should be in large-cap international equities and 40 percent in a small-cap international ones.
Of the remaining balance of your portfolio, which is allocated to the US markets, you should also include a small- to-mid-cap fund in addition to your current large-cap fund on a 50-50 split basis.
In regard to the savings bonds, the amount involved is probably not enough of an allocation to fixed income to positively affect your portfolio by providing either income or stability. With your 30-40-year investing time frame, Buechler thinks that over the long term, you're better off placing that money in your equity portfolio.