Last in the series of young women and their money — that is, unless we receive more letters from readers.And, now as promised, back to the last question from our young professional career woman.Apologies for the sidetracking with other pressing commentary in the last few weeks. I hope this last article is worth waiting for.Our reader’s query is this. What should a 30-year-old’s portfolio look like? ie how much percentage in equities, bonds, commodities, real estate etc.?The question about investment allocation is a tough one to answer in spite of the fact that those pretty picture asset allocation wheels in the investment packets make it look easy.Making a decision regarding the percentage balance of security allocations in the portfolio brings many choices, literally, thousands of investments of all kinds: stocks, bonds, mutual funds, real estate investment trusts, hedge funds, structured products, master limited partnerships, currency trades, commodities, options, futures, and so on.Certainly, we could take the easy financial sales pitch and push on purchasing the latest high performing mutual fund (already fully asset allocated).The reader would just have to feel comfortable with the amount of risk in the high return portfolio, because the swing in investment performance could be significant — up and down with capital market volatility. Your asset allocation category — in choosing a high reward security — defines you as an aggressive investor.Risk (of loss) is an important criteria since the US stock market performance reached an all-time high early this week.The explanation for taking on great investment rewards for greater risk often goes like this. “Since you are young you can afford to take on more investment risk, because you can earn the money back over time, if your investment portfolio takes a hit. Now is the time to put your money to work!”Or, I can be an old financial planner touting the traditional standard investment parlance with advice that has been around — for I don’t know — many years.To find your asset allocation, subtract your age from 100, and voila, you have the percentage allocation to equities — 71%. The remaining 29% can be allocated say 20% to bonds while scattering the last percentages among a couple of commodity or hedge funds.This is the standard recommendation that can be read ad infinitum on investment websites. But, you aren’t standard, are you? Are any of us standard? No, we are unique beings with our own goals and dreams for success.We think we are not standard until we succumb to fear in a down stock market; then, many of us become part of the herd, once again selling at the low valuations (even assets in our pensions) just after we bought into the prevailing financial advice and bought a fund at the recent high valuation.Risk, yes, let us talk about risk: in life, in employment, in capital markets, in our health, in our financial security.Have you ever been asked to take a personal risk tolerance test?What did you think? Did it make you more comfortable with choosing as asset allocation. This is a routine assessment provided during an investment decision meeting.I prefer to take a four-pronged criteria approach, one that fits the goals of the individual first. The first three criteria have to be completely satisfied before outside investing in capital markets comes into the equation. We can’t count your Bermuda National Pension in the criteria because it is mandated by law.You have four important areas in your financial life that must be covered.1. Security: How secure is your job? Could you find another of equal or greater salary?2. Necessities: Can you afford right now to feed, cloth, transport, and house yourself comfortably on your current salary? Is your shelter guaranteed, that is, do you own your home, or rent?3. Managed risk: How much money have you saved? Do you have enough of a buffer to carry you through a very long period of unemployment (two years minimum) and incessant cash withdrawals? Is your mortgage close to being completely paid?4. If you can answer yes, to these questions, then you can consider investing.This sounds harsh, doesn’t it? And not only that, but you think, too, that I haven’t answered your question about portfolio asset allocation. Actually, I have.If you have your basic living needs completely covered, you can afford to invest aggressively in capital markets, knowing two things. If your portfolio depreciates on paper, you can afford not to sell, but to wait for the valuations to recover — because you don’t need (or have access to the money). And, secondly, if the capital loss is permanent, it won’t put you out of business or out of your home.How much can you afford to lose? How hard do you work for your net salary? Yes, always think about take-home, not your gross salary.After putting in those long hours to bring home that paycheck, you may have become very careful about where your money goes.If you are like me (and as so many people), you hate losing money — for any reason — which then makes you an extremely conservative person. You would prefer to receive a very low return on your investments in order to feel secure about protecting your principal.What kind of person are you? Careful cautious disciplined, or gregarious, exuberant, taking life as it shows up.What should your allocation be? It will depend upon the kind of person you are, and how you feel about financial security first.Consider using the Time Horizon asset allocation STEPS. This is one that I often used and that clients liked as well.1. Very good savings buffer — do not use for any investing2. Invest in yourself — education, education, education3. Own your own home — so that you always have a roof over your head4. Once home fully secured, time to consider market investments5. Initially, place small residual cash into capital markets until you are comfortable with the results6.Manage your pension carefullyBottom line. You have to feel comfortable in your financial life. Secure your lifestyle first, and always before investing.Martha Harris Myron JP CPA PFS CFP TEP is a Bermudian, and a cross border financial planning specialist / journalist. Her articles are published domestically and internationally, focusing on the challenging financial environment for local and international residents and their families living and working in Bermuda with connections across the pond in the North Atlantic Quadrangle: United States, Canada, United Kingdom and Europe. Inquiries to martha.myron@gmail.com