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Investor Tips – What’s the best diversified portfolio mix?

As with anything related to investments, opinions can vary wildly and it is often hard to know which is right or wrong.

But conventional thinking tells us that a diversified portfolio is made up a mixture of stocks and bonds with a small element of alternative investments.

The standard investor portfolio should generally contain 10 – 30 different individual stocks and bonds, and possibly a few mutual funds.

But what about the balance between stocks and bonds?

The mix is usually around 60% stocks and 40% bonds.

A mix of 70% stock and 30% bonds is considered more aggressive.

Generally, the higher the percentage of stocks, the more aggressive the portfolio.

Alternatively the higher the percentage of bonds, the more defensive the portfolio.

But what if you don’t have the time to research up to 30 different stocks and bonds?

The use of ETF’s (Exchange Traded Funds) has now made it possible for the average investor to easily purchase a simple bond or stock index whilst paying very low management fees (unlike mutual funds where fees can often exceed 2% per annum, regardless of performance).

This could be done with just two ETF’s – “DIA” represents the Dow Jones Index of America’s leading 30 shares, and this could be combined with the ETF code “TLT” which represents US government treasury bonds.

Just by buying these two investments in a 60/40 ratio, you can achieve low cost diversification in a relatively low risk investment.

Accountant Loughton – Transform Accounting – The Essex Accountants

Disclaimer – The information presented in this article is intended for education purposes and is not intended to be used as the sole basis for any investment decision nor should it be construed as advice intended to meet the investment needs of any investor. The author may hold positions referred to in this article. Please perform your own research or contact a qualified financial adviser prior to making any investment decisions.

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