A key to successful investing is an appropriate asset allocation. Upon retirement, a proper asset allocation is even more important.

There are some standard formulas and I will review three of them.

The first is the classical standard endowment formula, which is 60% in equities and 40% in bonds. It was hoped that an average return of 10% could be achieved with an annual payout of 5%. Current endowment investing is more sophisticated and, in any event, a 5% payout may be too aggressive. This percentage strategy can be simply duplicated by purchasing the Vanguard Balanced Index Fund.

The second formula was developed by John Bogle, who oversaw the tremendous growth of the Vanguard Index Funds. His formula is that you should own your age in bonds, i.e. if you are 65 years old, you should own 65% in bonds and 35% in equities.

The third formula is a variation of the age-based allocation, which is promoted by Charles Schwab. His formula is that you should own bonds at your age less 20%, i.e. if you are 65 years old, you should own 45% in bonds and 55% in equities.

There are also three alternative methods that I would like to present.

The first one is what I call the Davis Theory, which is promoted by Shelby Davis of the Davis Funds family. He believes that most negative market cycles last at most three years. Therefore, an investor should keep assets equal to three years’ expenses in short term bonds and the balance in equities.

The second approach is advocated by William Bernstein, who believes that you should take the money off the table. The number needed to spend in your retirement should be placed in safe short term investments with the balance in other investments. This protects you from a bear market early in retirement. See Money Magazine, September 2012.

The final approach states that the old well-known formulas are wrong and that allocations should take into account a severe market correction early in retirement that will be hard to recover from. Michael Kites believes that your equity portion should be small at retirement and grow over time because, as you age, you actually have less risk because of your life expectancy. He calls his approach counter intuitive from traditional perspectives. He is concerned that a period of poor returns in the beginning of retirement is a threat that you cannot recover from. See Money Magazine, March 2014.

This article is only meant to be a starting point. Read the magazine articles that I have referred to and any information that you have received from your financial planner, if you use one. Vanguard and T. Rowe Price have a wealth of information. If you use a financial planner, ask about the American Funds as a core component. Remember, you are no longer looking for home runs, but singles, doubles and, hopefully, few strikeouts. ■