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Generally, for someone who is getting more money than they need to survive, the most important part is risk vs. reward. Take a look at the Efficient Frontier charts in The best risk/reward points, corrected for inflation, tend to be around 60% bonds/40% equities (slightly better reward than the lowest risk point, which is 75% bonds/25% equities). As far as equities, the best risk/reward point is near 50% stocks/50% REITs. The longer the money can sit, the higher weighting for equities and the higher weighting for stocks. So a good point might be 60% bonds (of which around half can be government bonds), 20% stocks (maybe an index fund), and 20% REIT (another mutual fund).

Risk is defined as the standard deviation of the value of the equity from its trend line. Higher risk generally leads to higher return, but also to more volatility.

Good stuff Russ. Thanks!

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