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I've been using the "efficient frontier" as my asset allocation strategy. The "efficient frontier" is the mix of stock and fixed income investments that results in the least volatility of investment returns. The efficient frontier ratio of stock to fixed income securities depends on your time horizon.

Time horizon.................Percent Stocks
10 Years...........................44%
20 Years...........................66%
30 Years...........................71%
40 Years...........................77%
50 Years...........................82%

The Retire Early Home Page has a study on safe withdrawal rates in retirement that explains the use of efficient frontiers as an asset allocation strategy. You can read it at:

http://home.earthlink.net/~intercst/reindex.html

TMFPixy's idea of putting 5 year's worth of living expenses in cash and bonds with everything else in stocks is a good one. If you use a "safe withdrawal rate" of 4%, that would give you an 80% stock/20% fixed income ratio. That's right at the efficient frontier for someone with a 40 to 50 year investment horizon.
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