When it comes to asset allocation, there’s no one-size-fits-all solution.
Asset allocation should depend on factors such as age, income, risk tolerance, financial needs and goals.
However, here are some general rules that you can follow when deciding how to manage your stock portfolio.
Rule #1: Prepare an emergency fund
Although all the rules I will list here are going to be important, this is perhaps the most important of all.
The last thing you want is to be forced to liquidate your stocks during a market downturn and incur a loss on your investment.
In fact, I think it may be prudent to be a bit more conservative than that and have at least one year’s worth of expenses in cash.
Your emergency stash should be held in cash, preferably in a bank account that can be accessed quickly and easily.
By parking your cash in a savings account, you will also manage to earn some interest....