In our last episode, we talked about how the easiest way to gain portfolio diversification was by using two major exchange traded funds. To recap, you’ve probably heard that you should have a mix of stocks and bonds in your portfolio””one ratio that gets thrown around a lot is 60/40, which means 60% of the portfolio should be stocks and 40% should be bonds.
To make the portfolio more aggressive, you‘d increase the percentage of stocks to 70% and decrease the bond portion to 30%. And of course to slide more conservatively or defensively in a bad economic environment, you‘d lower the percentage of stocks and raise the percentage of bonds.
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