Traditional wisdom suggests a quick and easy “Balanced Portfolio” of 60% stocks and 40% bonds. But there are pitfalls to this type of quick and dirty balancing. Theoretically, when stocks fall, bonds should rise or at least maintain their value. More advanced balancing systems might add a Gold or precious metals component of perhaps 10%. Still, further refinement can decrease the stock portion and increase the bond portion as you get closer to retirement age. On average, a 20-year-old has a lot longer to recover from a market downturn than an 80-year-old. So, a younger person can accept higher risk in return for a higher reward, so a 20-year-old might have 80% in stocks and 20% in bonds. An 80-year-old, on the other hand, might have 80% in Bonds and 20% in stocks. In the following article, the Editors at Elliott Wave International look at some of the pitfalls of the balanced portfolio approach. ~ Tim McMahon, editor
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