By Thirds

Q: I’ve heard that investors should keep a third of their investments in stocks, a third in bonds and a third in cash. Do you recommend this?

--S.G., Charleston, S.C.

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A: Our basic formula for allocating money that you don’t expect to need for five or more years is 100% in stocks. Stocks can be volatile in the short term, but they perform well in the long term. Any money that you’ll need to use in the near future should be in something like certificates of deposit, money market funds or perhaps bonds.

We chuckle when financial advisors announce they’re changing the ideal portfolio mix from something like 47% stocks to 49% stocks. Such tweaking seems utterly un-Foolish, and you’d be racking up commission charges to buy and sell just to readjust your portfolio.

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Q: When do stocks split? Would a stock priced at $29 or $39 split? Or do most wait until they get near the $100 level?

--Erica Martin, Tucson, Ariz.

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A: There’s no fast rule. Some companies split their stock at relatively low prices such as $30, whereas others split after the price passes the $100 mark. Some rarely split and trade well into three digits.

Stock might be split merely to increase the number of shares outstanding, perhaps in order to meet a stock-exchange requirement. Other splits occur for psychological-marketing reasons. For example, a split may be a vote of management confidence: Executives wouldn’t authorize a split if they expected share prices to drop. Reducing a stock’s price bya split makes some investors think (incorrectly) that the stock is then a better value. We find stock splits in and of themselves rather meaningless. Though your number of shares increases, the value of your investment stays the same.