They can be volatile but can act as an inflation hedge.
– Cash: Provides liquidity and a safe haven in times of market uncertainty.
2. Building a balanced portfolio
The ideal asset allocation for your portfolio depends on your individual risk tolerance, time horizon, and financial goals. However, a general rule of thumb is to create a balanced portfolio by diversifying across these major asset classes:
– Stocks: 60—70%
– Bonds: 20—30%
– Real estate: 5—10% (if applicable)
– Commodities: 5—10% (if applicable)
– Cash: 5—10% (for liquidity)
3. Sector and geographic diversification
Beyond asset allocation, you can further diversify within each asset class:
– Sector diversification: Invest in different industries (technology, healthcare, energy, etc.) to reduce the impact of any single sector performing poorly.
– Geographic diversification: Invest in companies and assets located in various countries to reduce the risk of economic or political events affecting a single region.
4. Rebalancing your portfolio
Market fluctuations can cause your portfolio to drift away from your original asset allocation. Rebalancing involves regularly adjusting your investments to maintain your target percentages. This helps to ensure you don’t become overly exposed to any one asset class and maintains a balanced approach.
5. Professional guidance
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