This month mechcalvin fund has an good example of what a stable portfolio should be like, after the fund raising the cash reserve has increased up to ~30%
Follow by the golden rules of financial planning.
1. at the bottom is cash (31.06%), cash is always the most secure types, the only risk for cash is currency and inflation, high cash reserve meaning high liquidity and high buying power thus potential growth. That's also the reason why people say "Cash is King" at low tide.
2. up one level is loan (27.97%), you can see from many mutual fund and recognized this as bonds, bonds basically is a kind of loan as well, you lend money to companies for fix income and guarantee return, the only risk is default risk - the loaner unable to return, thus it is the second lowest risk of all. High % of loan/ bonds in a fund meaning it doesn't go for aggressive growth, but a stable and less volatility approach.
3. up one more level is business (0.77%), most of the time people see new business has very high risk, but I put this below mutual fund and stocks is because I am directly involve in the business I invest to, my evaluation of them is that they have little chance to fail and loss money than mutual funds and stocks, plus it is only very little at this stage.
4. On the second top level is mutual fund (17.38%), there is a lot of mutual funds on the market with different risk, but the mutual fund I picked is stock fund, which means the fund managers always go for very high stocks portfolio, so it has higher risk and higher volatility. However it still contains lower risk than stocks, since a fund has already diversify its risk by buying a large amount of different stocks (between 50-70).
5. on the top level are stocks (22.81%), contain only 3-4 stocks in this sector gives it the highest risk and highest volatility, but also the highest potential return.
Some people will add derivatives which has even higher risk than stocks, but my fund won't do derivatives because its dangerous nature.
So there you have it, we are at the very safe position no matter how the world is shocking outside, and at the moment it looks pretty calm outside, maybe with some undercurrents, but again, overall we are pretty safe with so much cash in hand!
