When it comes to asset allocation, it’s important to get the right mix of equities (stocks) and bonds but those aren’t the only two asset classes you should be aware of. The general rule of thumb, that your percentage of retirement held in stocks should be 120 minus your age and the rest in bonds, is a good start but falls short in giving you a good allocation mix because it ignores so many asset classes.
When you look at target retirement funds, you’ll see that some offer exposure to international equities and bonds, some offer a little mix of cash, and others don’t necessarily follow the 120 minus age rule in the first place.
What are some other asset classes? Consider putting a small percentage in investing in areas like real estate, or commodities, or precious metals, or even even artwork (OK, maybe not artwork). A small percentage in those areas could give you some much needed diversity given your risk profile.
Don’t just think stocks, bonds, and cash.