A conservative approach
In a conservative allocation model,
income-producing investments, such as bonds, take center
stage. Stock and stock mutual funds may play a more minor
role to provide modest growth to offset some of the eroding
effects of inflation. For investors seeking long-term growth,
a conservative allocation model probably wouldn't provide
enough exposure to stocks.
But sometimes a conservative approach may be appropriate.
For instance, if you have major financial responsibilities,
such as large amounts of money invested in your own business,
it might make sense to take on less risk in your investment
portfolio. Or if you're retired or expect to retire in
the near future, it may be unwise to put a lot of your
assets at risk in volatile securities at this stage in
the game, when your portfolio may not have time to recover
from a market downturn.
However, some experts recommend that even retired people
allocate a substantial portion of their portfolio to stocks,
since many people may spend 30 or even 40 years in retirement. |
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates 
