All investors -- including you! -- need to be aware of their ideal investment profile. This short article will help you determine that profile and also how to know whether you're properly aligned with it.
Having a wonderful time ... where am I?
Determining your profile is not overly complicated. Think about where you are in life, how risk-tolerant you are, and how long until you plan to retire. You'll likely fall into one of three profile categories:
Aggressive -- You're a long-term investor with 10 or more years until retirement. You're willing to take on more risk and volatility for potentially outsized returns.
Moderate -- Retirement is in sight, and your focus begins to shift from the risky battle for high returns to preserving what you've already built up. Still, you know quite a bit of your portfolio will stay invested for years to come, so you don't want to give up too much growth for stability.
Conservative -- You're in your golden years, and much of your money has a time frame of five years or fewer. You've not given up entirely on growth, but wealth preservation trumps all.
According to Shannon Zimmerman, advisor for the Motley Fool Champion Funds newsletter, you are the only person who can determine where you fall on that aggressive-to-conservative spectrum. And don't worry if you don't fit perfectly into one category; there are plenty of "tweeners" among us.
It's align time
Once you've determined your correct profile, make sure you're properly aligned with it. An aggressive portfolio should consist mostly of stocks or stock mutual funds. As you move through the moderate middle and on to the conservative side of the spectrum, bond funds should become a much bigger part of your invested assets.
In Champion Funds, Shannon maintains three model portfolios built around the profiles we've mentioned. The aggressive model is more than 90% invested in stock mutual funds, while its conservative counterpart is 65% in bond funds. What's more, there's a shift from more concentration in aggressive funds in the former model, such as a recent Champion Funds recommendation that counts Nordstrom
What kind of person are you?
Where do you fit on the spectrum? Is your portfolio modeled after your investment needs? If not, you should begin to make some adjustments to that will align you with your goals.
Shannon's model portfolios make for great templates to build your own investments on. If you'd like to see exactly how they're constructed, you're welcome to try out a free 30-day guest pass. There's no obligation to subscribe, and you'll have access to every issue and every fund he's recommended.
Pfizer is a Motley Fool Inside Value recommendation.
Rex Moore was a lineman for the county. At the time of publication, he owned no companies mentioned in this article. The Fool has a disclosure policy.
