A Balanced Investment Strategy combines asset classes in a portfolio in an attempt to balance risk and return. Investing your money in a balanced portfolio is a good way to ensure that your hard-earned cash is working to its fullest potential. The specific asset classes that you choose for your portfolio depend on various factors, including your risk tolerance and investment time horizon. This guide presents a balanced investment strategy that uses asset classes such as stocks, bonds and cash, to provide a diversified portfolio and help you achieve your financial goals.Types of AssetsThe most common asset classes are stocks and bonds. These two types of investments are similar in that they typically pay a regular income, although the amount of income may vary, and each has its own risks and rewards. Other common asset classes include cash equivalents and real estate.Balanced PortfolioA balanced portfolio combines both stocks and bonds in an attempt to balance risk and return. Buying both stocks and bonds can help you achieve your financial goals by helping to diversify your portfolio. If your investment strategy is diversified, it can help you weather market downturns better than a non-diversified portfolio, because it spreads your money across different asset classes.Because a balanced portfolio is spread across different asset classes, it might be a more appropriate investment strategy than a non-diversified portfolio for the long term. However, if you plan to use your portfolio to cover short-term needs, such as college expenses in the next four years or retirement in the next twenty years, consider other strategies. For example, if you plan to use your portfolio to pay off your mortgage in the next ten years and have no other debt, a non-diversified portfolio may be a good choice because it would focus on short-term needs.
