Lesson 43 Building Your Buckets
The Risky Bucket
As previously stated, the appropriate diversification standard is the world market of stocks. Of course, you can’t buy them all, but you can buy most of them through domestic, foreign, and emerging market index funds. Although it might appear riskier to buy foreign stocks than domestic ones, when mixed with domestic stocks in some appropriate ratio, the risk in the portfolio decreases quite nicely. You can accomplish this by buying just two Vanguard index funds. How’s that for simple?
A more sophisticated strategy incorporates different risk factors into the portfolio with the intention of spreading risk beyond the traditional stock markets. These risks are different, but not cumulatively ...
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