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TRUMP UNIVERSITY WEALTH BUILDING 101

No single asset allocation is right for everybody . So if you hear somebody from a
major brokerage firm on television say, “We currently recommend an allocation

of 60 percent stocks, 30 percent bonds, and 10 percent cash,” just ignore it.
What, then, is a reasonable asset allocation for you?

• You’re single, in your 20s, and investing for retirement 35 to 40 years
from now. I think 85 percent or so in stocks generally is okay, with the
rest in cash.
• You’re 40, married, and with two kids. You’re investing for their col-
lege educations, your retirement, and your spouse’s retirement. An
allocation of 70 percent stocks, 20 percent bonds, and 10 percent cash
may well be appropriate under typical conditions.
• You’re a married couple 10 years from retirement. You might go with
something like 60 percent stocks, 25 percent bonds, and 15 percent
cash.
• You’re about to retire and will need to draw 5 percent or so of your
nest egg each year for living expenses. You might have 40 percent in
stocks, 40 percent in bonds, and 20 percent in cash.

Periodically, you may also want to “rebalance” your portfolio to bring it
back to its targeted allocation mix. Over time, some investments inevitably
will grow faster than others, pushing the allocation out of alignment with
your investment goals and risk level.
Suppose you want stocks to represent 60 percent of your portfolio, but
after a recent stock market increase, they leapt to 75 percent. You can adjust
in either of two ways: sell equity investments and use the proceeds to increase
the percentages in bonds and /or cash; or make any new investments in bonds
while holding other money in cash.
Now let’s forget about theory for a minute. How about reality?
From the market peak in 2000 until 2003, when a strong recovery began,
the Standard & Poor’s 500 index tumbled 46 percent. As an investment advi-
sor responsible for the financial security of my clients, it was my duty to do

what I could to protect them. During the dark days of 2001–2002, my clients
had as much as 60 percent safely in cash. We survived.
The opposite is equally true. When valuations and risk are relatively low,
and the equities market is rising slowly but steadily, as was the case from 2003
through 2006, shouldn’t you increase your allocation to equities? At one point
in 2006, we were 80 percent-plus in stocks. It was a very good year.

My point is this: You can do well in the financial markets over time by
taking a balanced, detached approach. But if you want to make big money,

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