University of Illinois Extension

Saving and Investing in Turbulent Times

Gather Information

To evaluate your options, use the following tools to pull together information about the overall state of your finances.  

A net worth statement summarizes all of your financial assets (what you own) and obligations (what you owe). For help constructing your net worth statement, see the Net Worth worksheet in Making the Most of What You Have. You can read about the different types of assets and the ramifications of selling or liquidating certain ones. Then review the section, Questions to Ask Yourself.

Your asset allocation is the proportion of your savings and investments that are in different asset classes or categories of investments, such as:

  • Cash: Money that you can easily access, such as savings and money market accounts, money market mutual funds. The value of cash assets is stable and does not fluctuate.
  • Bonds: Interest-bearing investments that represent a loan to a corporation (corporate bonds) or government entity (such as municipal bonds, US Treasury bills and bonds, savings bonds). The value of a bond fluctuates with changes in current interest rates. On the maturity date, the face value of the bond will be repaid in full.
  • Large cap stocks: Shares of ownership in larger US companies. The value of stocks changes from day-to-day depending on the performance of that individual company, the state of the economy, and the movement of the overall stock market.
  • Small and mid cap stocks: Shares of ownership in smaller US companies. The value of these stocks may fluctuate more than the value of larger US companies.
  • Foreign stocks: Share of ownership in companies in other countries. The most commonly owned foreign stocks are companies in Europe and Asia. Emerging markets refers to stocks of smaller countries whose markets are not as well-established, such as many of the countries in Africa, Southeast Asia, and Central and South America. 

Mutual funds may belong to any of these asset classes. Some funds fit clearly into one category, but others invest in a variety of asset classes. Target date retirement funds, lifestyle funds, and balanced funds are examples of mutual funds that invest in different asset classes within a single fund.

The allocation of your money across these classes of investments determines the amount and types of risk you face, and how much you will earn from your investments. Risk and return are linked; to have the potential for higher returns over time, you must accept more risk.

Calculate your asset allocation using online tools such as Morningstar’s  X-Ray (www.morningstar.com > Tools > Instant X-Ray®), software such as Microsoft Money or Quicken, or tools provided by your mutual fund or broker. Or, you can do it with pen and paper. Add up your investments in each asset class, and divide by the total amount of your investments.

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