The rule of thumb is to use your age as a percentage of your savings to allocate to fixed income based funds (cash and bond funds) and the rest in stock funds (e.g. if you are 35, you might put 35% in bonds, 65% in stocks).

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After all, the market is up some 120% from its March 2009 lows, and that advance came amid a stampede out of stock funds and into fixed income.

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He notes that on a historical price-earnings ratio basis, the stock market is now undervalued and there is an abundance of money still sitting in fixed income funds.

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There could be a provision that the mix of equities and fixed-income securities in each account would change over time: As one got older, the portion of funds invested in fixed-income instruments, such as bonds, would increase, thereby reducing stock market exposure.

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