Pinning Down Portfolio Rules of Thumb

Investing can be complicated, but common portfolio guidelines can be a good starting point

Amy C. Arnott 25 January, 2021 | 4:28AM
Facebook Twitter LinkedIn

Illustration of a checklist and pie chart

Investing can be incredibly complicated, with hundreds of thousands of investment choices that can be combined in nearly infinite variations. The sheer number of options available--and the high stakes involved in getting decisions right--can make the process overwhelming. That’s one reason why rules of thumb can be useful. They’re a way of cutting through complexity and helping investors make decisions more quickly without getting bogged down in endless questions about “what if” or “what’s next.” These heuristics, or mental shortcuts, can help investors focus on the most important steps to take without getting trapped in analysis paralysis.

In this article, I’ll take a closer look at some of the most common rules of thumb for portfolio management. Most of them make sense as a useful starting point, but understanding their limitations can help investors use them more effectively.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

Do You Want To Take Control Of Your Finances?

Find The Tools Here

Facebook Twitter LinkedIn

About Author

Amy C. Arnott  Amy C. Arnott, CFA, is director of securities analysis for Morningstar.

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy