“All in stocks, or keep some in savings?” is an asset allocation question. The SEC’s “Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing” describes asset allocation as dividing a portfolio among asset categories such as stocks, bonds and cash, and says it matters because the returns of these categories have historically not moved up and down at the same time. Diversification happens between and within categories, and rebalancing brings the mix back to the original, either on a schedule such as every six or twelve months or when a weight shifts by more than a percentage set in advance.
1. Stocks have the greatest risk and return; bonds are less volatile with more modest returns; cash equivalents are safest with the lowest return.
2. Diversification: “Don’t put all your eggs in one basket” — between and within categories.
3. Rebalance every six or twelve months, or when weights drift past a preset percentage — by selling, or by directing new money.
The three categories — SEC
| Category | What the SEC says | Worth noting (ours) |
|---|---|---|
| Stocks | Historically the greatest risk and highest returns | — |
| Bonds | Generally less volatile than stocks, with more modest returns | — |
| Cash equivalents | The safest, with the lowest return; the main concern is inflation risk | Korean deposits and parking accounts sit here (our gloss) |
Keeping an emergency fund in cash is in emergency fund parking; saving versus investing growth is in saving vs investing.
What decides the split — SEC
| Type | What the source says | Worth noting (ours) |
|---|---|---|
| Time horizon | The months, years or decades you’ll invest toward a goal | — |
| Risk tolerance | Your ability and willingness to lose some or all of your investment | — |
| Why it matters | The three categories’ returns haven’t moved together historically | — |
| Too little risk | May not grow enough to meet the goal | — |
| Too much risk | May leave you short when you need the money | — |
Diversification — SEC
The SEC calls diversification spreading money among different investments to reduce risk — “don’t put all your eggs in one basket” — both between categories and within them, such as across companies and sectors for stocks. Funds make it easy to own small parts of many investments, but narrowly focused funds may not diversify enough on their own. ETF basics are in ETF basics.
Rebalancing — SEC
| Item | What the SEC says | Worth noting (ours) |
|---|---|---|
| What | Bringing the portfolio back to the original mix | — |
| When ① | On a schedule, every six or twelve months | — |
| When ② | When a category’s weight moves more than a preset percentage | No figure given |
| How ① | Sell overweighted categories, buy underweighted ones | Selling may cost tax and fees (our gloss) |
| How ② | Put new money into underweighted categories | — |
| How ③ | Direct regular contributions to underweighted categories | — |
An example — ours
Start 10 million won at 60% stocks and 40% bonds; a year later stocks are 8 million and bonds 4 million. Of 12 million, stocks are about 66.7%. To get back to 60/40 (7.2 million and 4.8 million), move 0.8 million from stocks to bonds, or put new money into bonds. The numbers are our example.
Checklist
- ☐ Write down when you’ll need the money (time horizon)
- ☐ Decide how much loss you could bear (risk tolerance)
- ☐ Set a stock, bond and cash split
- ☐ Diversify within each category too
- ☐ Fix a rebalancing schedule (6 or 12 months) or drift threshold in advance
Questions that remain
What’s the right split?
The SEC gives no single answer; it depends on your time horizon and risk tolerance.
How much drift before I rebalance?
The guide only says a percentage set in advance and gives no figure; we haven’t added one.
Sources
- US SEC — Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing — source (page shows: last modified 28 August 2009; checked 19 October 2026). Definition, time horizon and risk tolerance, three categories, why it matters, diversification, funds, 2 ways to time and 3 ways to rebalance.
- Not read. Korean agency asset allocation guidance.
- What we added. The “worth noting” column and the Korean everyday gloss.
Where else to check
- Your provider or product documents — what your holdings contain.
Written on 19 October 2026. The content is from the source; the glosses are ours.
