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2. Determine Target Percentages for Each Asset Class

Once you know the target size of your portfolio, you can use the target allocation percentages listed in your investment plan to determine how much you will invest in each remaining phase. Multiply the target allocation listed for your core exposure by your target portfolio size. This will give you the dollar amount you should invest in core assets. Invest in core assets until you reach this target amount.

Assume that in your investment plan, you listed a target allocation of 60 percent for core exposures, 10 percent in international investments, 10 percent in small-capitalization investments, and 20 percent in bonds and cash. To calculate the target amount for your core investments, multiply 60 percent by your target portfolio size of $100,000; you should invest $60,000 in the core asset class. The remaining asset class allocations are calculated in a similar manner: 10 percent multiplied by $100,000 equals a $10,000 allocation for both international and real estate investments, and 20 percent multiplied by $100,000 equals a $20,000 allocation for bonds and cash, which comprise your emergency fund. Note that your target portfolio goal multiplied by the amount of your allocation to cash and bonds (your emergency fund) will give you your emergency fund amount.


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