Do you want to build wealth?
Asset allocation is the process of dividing your portfolio into stocks, bonds, and cash. A famous 1990 study by Kaplan and Ibbotson proves that asset allocation is the most important investment decision for your investment success—far more important than selecting individual securities within the broader asset classes stocks, bonds, and cash.
But what’s the best asset allocation for you?
- 20% stocks, 50% bonds, 30% cash
- 50% stocks, 50% bonds
- 80% stocks, 10% bonds, 10% cash
- 100% stocks
These different asset allocations have a significant impact on your portfolio risk and return. You must invest most of your time and effort in getting the numbers right.
This is where online tools for asset allocation come into play. They allow you to play with the numbers and see for yourself, based on historical asset class returns, what’s the most sensible investment decision for you.
The best tool for asset allocation comes from my student Ann who just started out with Python and the Python visualization framework Dash. With Python, Dash, and Flask, she has built an incredibly useful tool to help you, as an individual investor, save thousands of dollars of fees paid to investment advisors. And the best thing: it’s 100% free! Check it out.
I just recorded a video that leads you through the app.
Click to watch the video and try out the app. Here’s a screenshot of the app:
Here are some features of the app:
- Find your risk-optimal portfolio: Divide your money into stocks, bonds, and cash.
- Industry leading data: almost 100 years of historical data to backtest different asset allocations.
- Rebalancing tool: bring your portfolio back to the asset allocation year over year.
- Inflation: see how inflation eats away your return.
Click to play with the app: Don’t miss out and make the most important investment decision in your life now!