Exact portfolio allocations will differ based on investor needs, risk tolerance, and other factors. Therefore, it is impossible to recommend what percentage of investment capital to allocate among each security category without knowing an individual investor's unique situation. However, in general, a balanced portfolio should include certain security classes in some proportion. Each class of investment tends to perform a particular role. For example, a stock index fund and dividend stocks follow the equity market, generally appreciating over the long-term as companies' profits grow. Corporate bonds don't generally grow in value as much, but provide regular income, which is especially valuable during recessions when cash and stability are needed. Likewise, real estate investment trusts (REITs) and commodity-class investments do not follow equity market trends and can further offset equity losses as the economic cycles swing. Lastly, savings accounts provide readily available cash, which protects investors from having to sell their active investments--potentially at a significant loss--if a sudden financial emergency arises during a market downturn.
Equity index fund
Broad-based index funds track the stock market and, though volatile, can yield substantial returns over the years. Investors can choose from funds that concentrate on the total stock market, or invest in a mix of funds that concentrate on large, small, and mid-sized companies, as well as funds that invest in foreign stocks as well as U.S. based companies.
Dividend-paying stocks yield both capital gains and regular cash payments, in the form of dividends. Since they are able to share a portion of their profits on a regular basis with their investors--which is the definition of a dividend-- companies that provide equity dividends tend to be the least likely to fail during hard times. Many mutual funds concentrate their investments solely on companies that pay dividends, and many concentrate on companies that have steadily increased their dividend payments over time.
Corporate bonds offer fixed income payments. Bond rating agencies quantify the default risk of a given company. Since bond interest payments are regularly timed, they can be used to augment regular income. Bonds follow different, but related, market and pricing cycles compared to equities. They tend to hold their value when stock markets are down, but don't gain value as rapidly as stocks when the stock markets are rising.
In the US, law requires that 90 percent or more of a REIT Index fund's earnings to be distributed to investors. Historically, there is low REIT correlation to equity market swings, which has tended to make them a worthwhile inclusion in many investors' balanced portfolios. During recessions, REIT value tend to increase at a rate between that of bonds and equities.
Physical assets such as oil, metals, or crops possess a market dynamic that yields returns that are negatively correlated to bonds and equities. Aside from offsetting equity losses during a recession, commodity returns are typically higher than inflation. By contrast, fixed income sources such as bonds or stock dividends may not keep up with inflation.
Extremely low yields on savings accounts are compensated by the fact that you can readily cash them out. In case of an emergency, selling other assets could force you to take a loss at a time when you don't want to sell, and could expose you to fees. Savings accounts offer ready cash, when you need it.