What is Balanced Investing?

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What is your investing style? That is one of the first questions an investment professional will ask you when you seek their advice. There are many terms that can be used to define an investing style: Aggressive, conservative, growth, value, active, passive. Another way to define an investment portfolio is how the funds are allocated. There are basically 3 types of allocation: Income Portfolio: 70% to 100% in bonds, Balanced Portfolio: 40% to 60% in stocks, Growth Portfolio: 70% to 100% in stocks. My current portfolio contains 44% stocks, 13% bonds, and 43% cash. 89% of my stock investments are in US companies. Large diversified mutual funds always have a small percentage of foreign stocks. But, my exposure to Asian companies is still less than 1%.

My portfolio just barley falls into the balanced style, because it contains 44% stock. The 43% cash position is generally because most stocks are over priced right now. As soon as interest rates start to increase, stocks are likely to lose value. With inflation going up every month, we should see interest rates start increasing in the first half of 2022. I like to have an investment strategy that looks at least 6 months into the future. Having a large cash position also reduces the overall volatility of a portfolio. Something that is important as you get closer to retirement age. A balanced investing style is good if you don’t like to see big fluctuations in your account. But, this also means that your portfolio will grow much slower than if you had a portfolio of all growth stocks.

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