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The Most Important Decision You'll Make About Your Portfolio

1970s 1980s 1990s 2000s 2002-2011 Worst One-Year Return
100% stocks/0% bonds 5.9 17.6 18.2 -0.9 2.9 -43.3
70% stocks/30% bonds 6.0 16.5 15.5 2.1 5.2 -32.3
50% stocks/50% bonds 6.0 15.5 13.6 3.9 6.5 -24.7
30% stocks/70% bonds 5.9 14.5 11.7 5.5 7.7 -17.0
0% stocks/100% bonds 5.5 12.6 8.8 7.7 8.9 -14.9

Source: Ibbotson Associates

The more bonds are added, the more the range of returns is narrowed - on the upside and the downside. If you spend some time gazing at that table, you may get a better feel for the mix of stocks and bonds that is right for you.

3. What you really did

The Great Recession, during which stock markets dropped by half or more from October 2007 to March 2009, was a frightening time to be an investor. But like many times of tribulation, it offered us an opportunity to learn more about ourselves. In this case, you learned about your real-life risk tolerance - what you'd really do when the economy and markets are collapsing. Did you hold on, buy more, or sell? If the latter, did you get back into the market before it rebounded by more than 100 percent? What you did during those dark days says a lot about how much risk you can really stand. Because make no mistake: The stock market will tank again; we just don't know when.

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