Lesson 40 It’s the Portfolio, Stupid!
Modern finance is all about moving from a solution based on individual securities to a portfolio solution. Building an investment program on a stock-by-stock basis rarely works.
The appropriate solution is to divide your investments into two buckets: a risky (stock) bucket, and a risk-free bucket (short-term bonds of high quality). The first decision an investor needs to make is how much to put in each bucket. Start by identifying all the cash flows that the portfolio must support for the next several years. That’s the minimum for your bond bucket. All the rest might be put into risky assets if that doesn’t exceed your risk tolerance. Otherwise, put more into your bond bucket until you can sleep well ...
Get The Retirement Challenge: Will You Sink or Swim? now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
