After some thought and reading, I have decided on the following asset allocation ratio for my current age and position:
70% Stocks / 30% Bonds
Although since I am only 26, some people say I should be more aggressive, I am being realistic in the amount of volatility that I think I can endure and still stick to my plan. Would you really keep your positions if they dropped 35% in one year? That would mean about $20,000 for me, enough to cause some serious heartburn.
However, I am saving for a house as well, and since I’ll need that money in less than 5 years, I think of it as a separate “basket” of money. I am going to handle it much more conservatively. More on that later, but that will allow me to change the rest of my portfolio to:
80% Stock / 20% Bonds, or more specifically:
40% Large Cap / 20% Mid&Small Cap / 20% International / 20% Bonds
This is very similar to my current 401k Asset Allocation. My Monthly Goal due 12/31 is now complete. I thought about putting some in REITs, but I personally think they are a bit inflated right now, and I will get exposure to Real Estate when I buy a house.