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The asset allocation of my balanced portfolio comprises
of income along with capital preservation.
For most people, the balanced portfolio is the best option not only
for financial reasons, but for emotional as well. The ideal result
is a mix of assets that generates cash as well as appreciates over
time with smaller fluctuations in quoted principal value than the
all-growth portfolio. My model portfolio divides assets between
medium-term investment-grade fixed income obligations and shares of
common stocks held in Exchange Traded Funds.
A portfolio based on this model attempt to
strike a compromise between long-term growth and current income. The
allocation is calculated by using age less 100. For example, when my
age is 60 then 60% is allocated for fixed income obligations
(Corporate & Sovereign Bonds, US Treasuries, GNMA's) and 40% is
allocated for growth (ETF Index Funds).
When to sell Fixed Income positions: I use the same exit
strategy for any of my positions I am holding, only the percentage
is different. I sell 1/2 of the position when the funds is down
about 6%
and I sell all when the funds trade 9% down.
Allocation: using the above age example,
the portfolio provided 2 examples of allocations. For fixed income I
prefer Mutual Funds. Why Mutual
Funds? I don't want to start swing trading with the fixed income
allocation, because it's a long investment position. Here is my allocation table of
positions for 2 age groups based on my investment strategy: |
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Balanced Model Portfolio
The following investment guide is not a trade
recommendation, it only reflects my personal investment strategy
My smallest fixed income portfolio
holds 4 mutual fund positions, while
my largest fixed income portfolio may hold as many as 8 mutual fund
positions. |
