Harvard Management Co. had almost 40% of its "in house" portfolio in iShares MSCI Emerging Market ( EEM) and a total of 72% in various emerging market ETFs and individual stocks, according to a recent SEC filing. That portfolio, while small, is the most transparent part of the endowment. The heavier the weighting to emerging markets, the more volatility. This can work for or against you, depending on the direction of the market. For this decade, it has helped. But in 2008, it was a drag, as iShares MSCI Emerging Market fell by half versus 38% for the S&P 500. Harvard's allocation to emerging markets isn't right for individual investors. The "right" amount is subjective, though this point gets to a crucial aspect of managing your portfolio -- or, more correctly, your portfolio's volatility. There are industries that offer a greater chance of going up a lot, such as emerging markets, agriculture and technology. And there are categories that offer little chance of going up a lot, like utilities, Ma Bell telecoms and mega-cap health care. The key is striking a balance between the two categories to create a portfolio that offers sufficient long-term growth but still allow for sleeping at night. This is the hard part. So let's look at numbers that can help begin to solve the problem. Over long periods, the stock market has averaged an annual return of 10%. Keep in mind that number includes booms and busts. For people who save properly, that's enough for retirement.