Your suggested allocation is certainly within the range of the sane, and I agree with others that the most important thing is to understand a) your own risk tolerance, and b) the actual risk characteristics of your investment.
Since you have suggested 40% stocks, 60% bonds, what I think you should do is spend some time digging into growth charts for mutual funds that use that kind of allocation. A growth chart shows how much money you'd have if you put $10,000 into a mutual fund and left it there, no more contributions or withdrawals, with dividends reinvested.
Here are three. Wellesley is 37% stocks, LifeStrategy Income is only about 25% stocks, LifeStrategy Conservative Growth is about 45%. (Those are current allocations; unfortunately all three of these shift allocations over time, but I don't think they're ever very far from 40/60). I am not recommending these
and I did not pick these as the "best," I think the three-index-fund approach you plan to follow is better. I am using these three because they show the behavior of a 40ish/60ish blend, and because they are all funds that have been around for long enough to show long term behavior. I'm going to show the chart, but if the link below works for you, and try clicking on the chart and sliding the pointer back and forth and reading out actual dollar numbers, and dragging at the bottom of the chart to look at different time periods.
The semilog scale makes big changes look small, so be sure to pay attention to the scale at the left.
Don't use this to decide "which fund is best." Use it to decide how you feel about the risk involved. Use five-year periods. Ask yourself "how would I feel if I put money in 2004, saw nice robust growth for four years, and then lost, not
all my money, but all the growth
--dropping just about back to where I started, maybe even less?
Don't kid yourself: 40% stocks isn't 100% stocks, but even with 40% stocks, 2008-2009 would have really hurt. And in 2009 you didn't know what would happen by 2011.
Keep in mind: 1) no risk, no reward. 2) You really have to take the risk. It's not risk unless there's a real, serious chance of disappointment--doing worse than if you'd used safe investments. 3) It would be pessimistic to expect
something like 2008-2009 to happen soon. It would be optimistic to assume that it couldn't possibly
happen. For example, Just seven years after 1929, when people thought the market had recovered, it crashed again.
I don't think 40% stocks is crazy, but I'm a risk-averse semi-retiree and it's a little more than I'm comfortable with. There's no right or wrong here. You need to know your risk tolerance. The most important thing is to understand the actual risks. You need to dig into those for yourself, don't accept vague descriptions
like "high" or "low" or "about right for your age."
Here's the chart:
Here's the link: http://quote.morningstar.com/fund/chart ... %2C0%22%7D
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.