classify investments in to different asset types
REITs can be classified as equity, mortgage, or hybrid. A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. Trades like equity but the underlying is a property ot mortgage. So you are investing in real estate but without directly dealing with it. So you wouldn't classify it as real estate. CD looks more like a bond.If you look at the terms and conditions they have many conditions as a bond i.e. callable, that is a very precious option for both the buyer and seller. Self occupied house - Yes an asset because it comes with liabilities. When you need to sell it you have to move out. You have to perform repairs to keep it in good condition. Foreign stock mutual fund - Classify it as Foreign stocks, for your own good. Investments in a foreign country aren't the same as in your own country. The foreign economy can go bust, the company may go bust and you would have limited options of recovering your money sitting at home and so on and so forth. A foreign stock mutual fund definitely belongs in stocks. It's composed of stocks.  Your self occupied house is definitely real estate. You don have to keep in mind,however that selling it would create costs such as rent. I wouldn't leave it out, if doing that would cause you to buy more real estate. This would cause you to be overweighted in the real estate area.  I would tend to think if a CD as cash. While it could be considered a bond, as you said the principal doesn't go down.  The REIT is the toughest one. I would really like to see a graph showing how correlated it is to the real estate market. That would determine where I would put it.
"You have a high risk tolerance? Then learn about exchange traded options, and futures. Or the variety of markets that governments have decided that people without high income are too stupid to invest in, not even kidding. It appears that a lot of this discussion about your risk profile and investing has centered around ""stocks"" and ""bonds"". The similarities being that they are assets issued by collections of humans (corporations), with risk profiles based on the collective decisions of those humans. That doesn't even scratch the surface of the different kinds of asset classes to invest in. Bonds? boring. Bond futures? craziness happening over there :) Also, there are potentially very favorable tax treatments for other asset classes. For instance, you mentioned your desire to hold an investment for over a year for tax reasons... well EVERY FUTURES TRADE gets that kind of tax treatment (partially), whether you hold it for one day or more, see the 60/40 rule. A rebuttal being that some of these asset classes should be left to professionals. Stocks are no different in that regards. Either educate yourself or stick with the managed 401k funds." Here would be the general steps to my mind for creating such a plan: Write out the final desired outcome. Is it $x in y years to fund your retirement? Is it $a in b years to put as a house down payment? This is the first step in defining how much money you want at what point in time. Consider what is your risk tolerance and how much time do you plan on spending in this plan. Is it rebalancing once a quarter and that's it or do you plan on doing monthly research and making tweaks all the time? This is slightly different from the first where one has to be mindful of how much volatility would one handle and what time commitment does one have for an investing strategy. Also, how much money would you be adding to the investments on what kind of time table would also be worth noting here. Construct the asset allocation based on the previous two steps along with historical returns averaged out to be a first draft of what you are buying in general. Is it US stocks? Is it a short-term bond fund? There are more than a few choices here that may make sense and it is worth considering based on the first couple of responses that determine what this will look like. Retirement in 40 years may be quite different than a house down payment in 2 years for example. Determine what brokerages or fund companies would offer such funds along with what types of accounts you'd want to have as in some countries there may be tax-advantaged accounts that may be useful to use here. This is where you're almost ready to start by doing the homework of figuring out how will things work. This may vary depending on one's jurisdiction. Get the applications from whatever institutions you'll be using and run with the desired asset allocation across various funds and accounts. Note that in the first few steps there were points of being aware of how much would you have, how aggressive are you investing and so forth. This is where you actually send in the money and get things rolling. Run with the plan and make tweaks as needed to achieve result, hopefully desired or better. You should evaluate where to put your money based on when you need-by-date is. If you need it in the next 5 years, I'd essentially keep it in cash or no-risk savings accounts/cds, money market accounts, etc. If you need it further than 5 years from now, invest for the future with some form of asset allocation that matches your risk tolerance.   Research asset allocation and decide how to divide amongst different types of investments. **Retirement accounts have earnings requirements and maximum contribution limits. "Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense).  In Sole proprietorship, equity represents 1 owner.  In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2.  In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors.  As you can see, equity represents who owns the company. It is not what the company does or manufactures.  First and foremost, define the boundary of the firm. Are your books titled ""The books of the family of Doe"", ""The books of Mr & Mrs Doe"", or ""The books of Mr & Mrs Doe & Sons"".  Ask yourself, who ""owns"" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm.  Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity.  So what happens to the expenses of children if you follow the ""partnership"" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called ""The books Children 1"", and classify the expense in that separate book.  I advise using ""The family of Doe"" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries." I have had similar thoughts regarding alternative diversifiers for the reasons you mention, but for the most part they don't exist.  Gold is often mentioned, but outside of 1972-1974 when the US went off the gold standard, it hasn't been very effective in the diversification role.  Cash can help a little, but it also fails to effectively protect you in a bear market, as measured by portfolio drawdowns as well as std dev, relative to gov't bonds. There are alternative assets, reverse ETFs, etc which can fulfill a specific short term defensive role in your portfolio, but which can be very dangerous and are especially poor as a long term solution; while some people claim to use them for effective results, I haven't seen anything verifiable. I don't recommend them. Gov't bonds really do have a negative correlation to equities during periods in which equities underperform (timing is often slightly delayed), and that makes them more valuable than any other asset class as a diversifier.  If you are concerned about rate increases, avoid LT gov't bond funds.  Intermediate will work, but will take a few hits... short term bonds will be the safest.  Personally I'm in Intermediates (30%), and willing to take the modest hit, in exchange for the overall portfolio protection they provide against an equity downturn.  If the hit concerns you, Tips may provide some long term help, assuming inflation rises along with rates to some degree. I personally think Tips give up too much return when equity performance is strong, but it's a modest concern - Tips may suit you better than any other option.  In general, I'm less concerned with a single asset class than with the long term performance of my total portfolio. "I find it interesting that you didn't include something like [Total Bond Market](http://stockcharts.com/freecharts/perf.html?VBMFX), or [Intermediate-Term Treasuries](http://stockcharts.com/freecharts/perf.html?VBIIX), in your graphic.   If someone were to have just invested in the DJI or SP500, then they would have ignored the tenants of the Modern Portfolio Theory and not diversified adequately.  I wouldn't have been able to stomach a portfolio of 100% stocks, commodities, or metals.  My vote goes for: 1.) picking an asset allocation that reflects your tolerance for risk (a good starting point is ""age in bonds,"" i.e. if you're 30, then hold 30% in bonds); 2.) save as if you're not expecting annualized returns of %10 (for example) and save more; 3.) don't try to pick the next winner, instead broadly invest in the market and hold it.  Maybe gold and silver are bubbles soon to burst -- I for one don't know.  I don't give the ""notion in the investment community"" much weight -- as it always is, someday someone will be right, I just don't know who that someone is." Note the above is only for shares. There are different rules for other assets like House, Jewellery, Mutual Funds, Debt Funds. Refer to the Income Tax guide for more details. You could certainly look at the holdings of index funds and choose index funds that meet your qualifications.  Funds allow you to see their holdings, and in most cases you can tell from the description whether certain companies would qualify for their fund or not based on that description - particularly if you have a small set of companies that would be problems. You could also pick a fund category that is industry-specific. I invest in part in a Healthcare-focused fund, for example.  Pick a few industries that are relatively diverse from each other in terms of topics, but are still specific in terms of industry - a healthcare fund, a commodities fund, an REIT fund.  Then you could be confident that they weren't investing in defense contractors or big banks or whatever you object to. However, if you don't feel like you know enough to filter on your own, and want the diversity from non-industry-specific funds, your best option is likely a 'socially screened' fund like VFTSX is likely your best option; given there are many similar funds in that area, you might simply pick the one that is most similar to you in philosophy.