What is generally considered the best investment allocation for a normal pay person for their retirement savings?
I am wondering how to allocate funds across the stock market, bonds market, and real estate. Is there an allocation that has yielded the best return everything taken into account?
This is a very good question, with no obvious answer - the asset allocation all depends on the risk that you are willing to take and the time horizon until your retirement date.
Once this information is known you would be able to plot along a efficient frontier graph the mix of each of the asset classes (and sub asset classes) to determine the best fit for your circumstances.
There has not been the best allocation for this, as circumstances are different and over the period of time until your retirement date you will need to rebalance your asset classes, make sure that the risk is appropriate for you still and the time horizon matches your goal - as life is not a straight line !
There are many tools that can help make these decisions.
I hope that helps | 04.10.11 @ 08:34