The Importance of Keeping Your Eggs in Multiple Baskets

It’s a phrase we’re all familiar with: You shouldn’t put all of your eggs in one basket. This is particularly important when it comes to personal finances. To get the most out of your money, it’s crucial to diversify and keep your assets in the types of accounts that benefit you most.

Which eggs belong in which baskets?

Choosing where to put all of your funds is called “asset allocation,” and it’s an important part of money management. But how do you know which funds should go where? Here’s a quick guide:

• • Equities: Younger investors typically put money into equities, while retirees favor bonds and money market accounts. It’s generally good to have a 50:50 split of bonds and stocks; heavily investing in equities is risky, as the stock market tends to fluctuate.
  • Bonds: When you invest in stocks, your portfolio will increase and decrease as the market fluctuates. Bonds, on the other hand, are more predictable, as they pay out at regular intervals.
  • Cash assets: Money market accounts, savings accounts and certificates of deposit all fall into this category. They’re conservative places to keep your money, as their interest rates are usually pretty low.
  • Commodities: Commodities can be risky and should be a small portion of your portfolio. Their value fluctuates greatly depending on the world economy.

How should you divvy up your eggs?

When it comes to retirement planning, the first thing you need to calculate is how much you need to save on a monthly basis. From there, you can decide what types of accounts to utilize. It’s wise to speak with a financial adviser, who can help tailor an investment plan that aligns with your goals. WaterStone Bank Investment Services can help you navigate the way forward.

If you choose to take control of your investments and create your own plan, the first thing you should do is establish a timeline. At what age do you realistically think you can retire? What does retirement look like for you?

Try to save as much as you can each month for retirement. Younger investors can afford to put a higher percent of their money in equities, with the remainder in bonds. People of retirement age should aim for about 35% in equities and 65% in bonds.

As far as cash assets go, it’s wise to have about six months’ worth of money in savings in case of an emergency. Job markets can be unpredictable, water heaters can go on the fritz, and cars sometimes require unexpected, expensive repairs. Having cash on hand will help put your mind at ease and prepare you for the unexpected.

Still have questions about investing and what’s best for you? Let WaterStone Bank Investment Services help.