90/10 STRATEGY
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An investing allocation commonly described as 90% in a broad stock index fund and 10% in short-term government bonds.
Summary
The 90/10 strategy is a simple, low-maintenance investment approach where you put 90% of your money in a diversified stock index fund (for long-term growth) and 10% in safe, short-term government bonds (for stability). This strategy is popular because it's easy to understand, provides broad market exposure, and offers a small safety cushion while still allowing for significant growth potential over time.
Usage Context
This term is important when discussing basic portfolio construction, retirement planning, passive investing strategies, and as an introduction to asset allocation concepts. It's often presented as a starting point for new investors before they learn about more complex portfolio strategies.
Common Confusions
- Thinking you need to actively trade or pick individual stocks
- Believing the 10% in bonds will provide significant returns rather than stability
- Assuming this strategy works for all time horizons and risk profiles
- Confusing this with day trading or active investment strategies
- Not understanding that this is a buy-and-hold strategy requiring patience
