Asset allocation is perhaps the most important consideration when designing an investment portfolio.  Selecting an appropriate mix of stocks, bonds, and cash and maintaining the proportions through regular rebalancing, is about as sure-fire a winning strategy as it gets.

And the online financial service firms are there to help, right?  If I just follow the directions on the website, it’ll be easy as pie, right?  Wait a minute, hombre, not so fast.  Let’s compare the offerings of three large online services:  Schwab, Fidelity and Morningstar.

What exactly is “aggressive”?

The first step in selecting an appropriate asset mix is to determine what “investing” style matches your investment time horizon and your tolerance to risk.

If you’re nearing retirement, you want to have a more conservative portfolio than if you’re just starting out.  Workforce newbies have the most to gain from a high-risk-high-gain allocation, and more time to recoup, should the markets sour.  Likewise, if you’re the type who loses sleep when the markets see-saw, you might be more comfortable with a lower volatility portfolio, and accept that you might have to work an extra year — that may be a good trade-off for you.  Each website offers a walk-through questionnaire to help you evaluate where you fit on the spectrum of risk tolerance. Continue Reading »