90/10 Strategy
 |
Definition of '90/10 Strategy'An investing strategy that involves deploying 90% of one's investment capital in interest-bearing instruments that have a lower degree of risk, and the balance 10% in high-risk investments. This is a relatively conservative investment strategy that aims to generate higher yields on the overall portfolio. Potential losses will typically be limited to the 10% that is invested in the high-risk investments, depending on the quality of bonds purchased. |
 |
Investopedia explains '90/10 Strategy'A common application of the 90/10 strategy involves the use of short-term Treasury Bills for the fixed-income component (90% of the portfolio), with the balance 10% used for higher risk securities such as equity or index options or warrants.For example, assume an investor with a $100,000 portfolio uses the 90/10 strategy. He or she invests $90,000 in one-year Treasury Bills that yield 4% per annum, with the balance $10,000 deployed in equity in the S&P 500. If the S&P 500 returns 10% at the end of one year, the overall return on the portfolio would be 4.6% (0.90 x 4% + 0.10 x 10%). However, if the S&P 500 declines by 10%, the overall return on the portfolio after one year would be 2.6% (0.90 x 4% + 0.10 x -10%). |
Related Definitions
Articles Of Interest
-
4 Steps To Building A Profitable Portfolio
This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation. -
How To Be A Conservative Investor
It may not be the most exciting path to take in the investing world, but conservative investing is an extremely safe bet. -
An Alternative Covered Call Options Trading Strategy
This different approach to the covered-call write offers less risk and greater potential profit. -
Achieving Optimal Asset Allocation
Minimizing risk while maximizing return is any investor's prime goal. The right mix of securities is the key to achieving it. -
What Type Of Trader Are You?
There are different ways stock traders attempt to profit from market movements. Which of the strategies do you use? -
How To Start Saving For Retirement
If you establish these money-saving habits and patiently allow your wealth to build, you will be taking some huge steps forward in making your financial future more secure. -
Behavioral Bias - Cognitive Vs. Emotional Bias In Investing
We all have biases. The key to better investing is to identify those biases and create rules to minimize their effect. -
Making It Big On Wall Street
Read about some of the most glamorous Wall Street jobs and what it takes to land one. -
Quants: The Rocket Scientists Of Wall Street
Blend math, finance and computer skills to command a high - and well deserved - salary. -
Why Your Pension Plan Has Sovereign Debt In It
One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.
Free Annual Reports
