If Jian has a low tolerance for risk, what is a recommended asset allocation for his retirement plan?

For an individual like Jian, who has a low tolerance for risk, a recommended asset allocation typically features a higher proportion of more stable and less volatile investments, such as bonds, compared to stocks. The choice that represents a balanced approach is the allocation that includes 50% stocks and 50% bonds.

This allocation provides some exposure to stocks, which can offer growth potential over the long term, while also maintaining a significant portion of bonds, which tend to be less volatile and can provide steadier income through interest payments. This mix can help Jian pursue capital growth while also prioritizing the preservation of capital, aligning with his low-risk tolerance.

A 100% stocks portfolio would expose Jian to high volatility and potential significant fluctuations in the value of his investments, which would not suit his risk profile. The other option with a heavier allocation toward bonds (70% bonds, 30% stocks) could overly restrict growth potential, depending on his investment timeline, making the 50/50 mix a more appropriate balance. Dynamic asset allocation often entails adjusting the ratios based on market conditions, which might lead to higher risk levels that could be inappropriate for someone with low risk tolerance.