The moment you have identified the split between stocks and bonds, you need to focus on whether you prefer to use funds that cover large parts of the market (Total Market funds) or whether you prefer to slice and dice your portfolio into sub-asset classes. For many people, this choice will be determined by the funds available in their 401k-type plans.
Others may prefer to have fewer funds that cover larger
parts of the market for simplicity of management.
One part of the market that everyone needs to consider is
international investing. Many experts recommend investing 20-40% of your equity
allocation in international holdings.
Some investors believe that 50% is the better number to
reflect the position that the US represents in the world economy (approximately
50%). Since none of us can predict the future, the correct number that would
return the highest percentage in the next 20 to 30 years could be any of these
figures. Like much of investing, the ultimate choice is yours. Pick one number
and then stick with it.
