A 60/40 portfolio is a simple allocation strategy where you invest 60% of your money in stocks and 40% in bonds. This mix aims to provide reasonable growth potential from stocks while limiting risk through the stability of bonds. The exact split can be adjusted based on your personal risk tolerance and goals.
You have $10,000 to invest and choose a 60/40 portfolio. You invest $6,000 in a stock index fund to capture growth potential, and $4,000 in a bond fund for stability. If stocks drop sharply, your bonds help cushion the loss. If stocks perform well, the $6,000 provides meaningful gains.
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