Q. What should the mix of stocks and bonds be in my retirement portfolio?
A. Unfortunately, the answer to this simple question is incredibly complex and doesn’t even necessarily have a right answer. The short answer is, assuming future market returns resemble past market returns, you should invest as much of your portfolio in stocks as you can tolerate without selling low in a terrible bear market.
Unfortunately, explaining that sentence is going to take the rest of this article. The process of deciding how much of your portfolio to invest in what type of security, such as stocks, bonds, and real estate, is called asset allocation. It turns out that, in the long run, asset allocation (ie, determining the mix of risky assets such as stocks to less risky assets such as bonds) matters far more than individual security selection or your ability to time the market, so it is a great place to spend your limited financial planning time and effort.