4. Your other assets and sources of income

There are other factors to consider when determining the riskiness of your portfolio:

  • Your job: If you're still working, the security and variability of your present and future income might play into your investment portfolio. If you have a reliable job with steady pay, you can take more risk. However, if your income is variable and unpredictable, you might want to play it a bit safer with your portfolio. Also, we hope it goes without saying that you shouldn't have more than 5 percent of your portfolio in company stock.
  • The amount of other income: Most Americans will receive some Social Security, which will provide a foundation (however modest) of retirement income that will be immune to market fluctuations. But you may have other sources of income that are at least partially independent of the stock and bond markets, such as a defined-benefit pension, annuity, trust, rents or business income. The more of this income you expect - and the more reliable that income will be - the more risk you can take with your investments.

The bondage bottom line

Given that interest rates are at lows not seen in decades, bonds are not very compelling these days. Many investors argue that it's much less compelling to own bonds yielding 3 percent when you can buy stocks with the same yield, and get potential capital gains and dividend growth to boot. But stocks will always fall victim to large declines; the extent that your plans and your stomach can't tolerate such drops is the extent to which your portfolio should be out of stocks.

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