Feng Shui Your Financial House

An Easy Way to Gauge If You’re Taking Unintentional Risk in Your Stock Portfolio

Compare it to a target date fund

Today’s financial feng shui task:

Compare your investment portfolio to a target date fund.

If you have an investment portfolio, compare its composition versus a target date fund with your retirement date from Vanguard or Fidelity.

If you’re a non-U.S. investor, pick one from a well-respected institution. In this case, you want big, stable, and boring.

A target date fund’s asset allocation (what it’s invested in) represents good, solid, middle-of-the-road conventional wisdom. As the fund gets closer to its target date, it becomes more conservatively invested, i.e., weighted more towards bonds than go-go growth stocks.

A target date fund is a good yardstick for “normal.”

No one gets fired for having the asset allocation of a target date fund. It’s conservative and by the book, at least as implemented by the Big Guys.

For this reason, this is a good way to gauge where your portfolio might be taking outsized risks, either by being too aggressive/too conservative or too diversified/too concentrated.