What's The Right Asset Allocation For Young Investors?

There is no right or wrong answer on how a young investor should build their assets for the future. Naturally, each individual person's scenario is unique, and there is no magical "one size fits all" formula to determine what young investors should invest in.

There is, however, a set of guidelines that should be followed.

"A Wealth of Common Sense," a blog that explains "the complexities of the various aspects of finance in a way that everyone could understand them," discussed the topic of what young investors should be focusing on.

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The blog is managed by Ben Carlson, a Certified Financial Analyst (CFA) titleholder and portfolio manager at Ritholtz Wealth Management. The investment pro offered the following general guidelines.

1. Dollar cost average into the markets over time. In other words, continue investing in stocks over time, even add to existing positions at higher costs per share.
2. Create good personal habits.
3. >Being young offers the advantage of being able to "weather out a storm" and accept volatility given the long-term nature of investments.
4. Make sure to grasp a basic understanding of financial history and understand how "manic" the markets can act at times.
5. Understand that stocks lost nearly 60 percent of their value in the latest financial crisis, and this scenario could present itself again.
6. Young investors who want "safety now" need to accept low returns. Investors who want safety later need to accept "occasional losses."
7. Stay out of credit card debt and put away at least a double digit percentage of your income.
8. Learn from prior investment mistakes and seek out the wisdom of family members to learn from their mistakes.
9. Try not to "get in the way" of compounded interest. Let it "do its thing."

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