Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at twitter.com/CharlesRAAII.


Discussion

Donald Rome from CA posted over 2 years ago:

Charles,
You wrote. "If you are age 55 or older, you can also contribute an additional $5,500 as a catch-up contribution".
While the catch up contribution amount is correct, in 2012, I believe the age should be 50 or older.
Donald


Charles Rotblut from IL posted over 2 years ago:

Donald,

You are correct. That was an error on my part. The article is being changed accordingly.

-Charles


John Goodell from MD posted over 2 years ago:

Somewhere in between for older investore (>65) may be ETFs picked from the AAII list.


Vern Andrews from CA posted about 1 year ago:

Your article is based on mutual fund managers selecting securities and you selecting 6 or more mutual funds for a deversified Portfolio. Obviously growth is less and risk is low, which is ideal and safe. However due to the fact that people are living longer and need more savings to insure your lifetime financial support than previously. Suggest if you are a real individual security selector or self manager for your personal Retirement Portfolio there may be other methods to use. A method I have used (sample of one) during the Distribution Phase of an Investment Portfolio is a real time Flexible Mix Strategy with special potenial Portfolio alerts that will provide a mechanism to re-allocate your Portfolio that is sensitive to the investing environment rather than once a year. During the 11th recession since WWII and the credit crunch when the S/P 500 Index declined by over 50 percent, my Portfolio only lost negative 8.73% and during the post slow recovery period the Distribution Phase Portfolio increased by a better growth percentage than the Index. I believe that this strategy will also work well during the Investment Phase of a Retirement Portfolio.


Jerry Mead from IL posted about 1 year ago:

I basically agree with the allocation scheme but worry about investing so much in bonds. I expect interest rates to rise at some point in the future which should cause the value of the bonds held to decline. When and how fast this will occur is the risk to a bond investment of the allocation model.


Aaii Kasturi from NJ posted about 1 year ago:

I wish all 401Ks would provide access to a Treasury Direct account inside the 401K and permit participants who want it to use it. Some people would just like the simplicity of this to preserve capital and avoid all fees


Alessandro Martelli from CA posted about 1 year ago:

@Jerry, I agree that today the main risk in bonds is duration risk (AKA interest-rate risk) -- last weekend's Barron's has an interview with the UBS Wealth Management top managers pointing out this means convincing investors to switch from Treasuries and investment-grade corporates to well-selected junk (HYLD is a jewel there -- DON'T go for index funds in bonds, very differently from ones in stocks they make no sense... where's the sense in wanting to lend more to companies which are more indebted?! -- HYLD also carefully avoids "covenant-lite" and even-worse PIK junk bonds and for my money is THE way to get exposure to junk) -- also emerging market bonds and floating rate secured senior bank loans (the latter best done through CEF, closed-ended funds).

In addition to VWIAX (2/3 in investment grade corporates, 1/3 in dividend-paying large caps -- unusual for Vanguard in being actively managed, but with a 0.18% expense ratio that's pretty Vanguardy anyway;-) I find I have no trouble meeting my target 25% allocation to fixed income (oh, I own a few individually selected preferred stocks as part of that allocation, too -- technically equity but pretty much fixed income in real life;-).

Ben Graham taught us to aim for 50/50 bond/stock split in normal markets, each slice variable between 25/75 in extreme cases (and, we are pretty extreme these days - as Graham was circa 1946), but never, ever beyond that -- age NOT a consideration. I'm sure today's advisors think they're smarter than Graham, but I have my doubts in the matter;-)... [FWIW, recent Montecarlo simulations showed he was right and 50-50 (actually most anywhere around 40-60 to 60-40), with rebalancing, was pretty much optimal all the time if one can't call bond or stock bubbles].


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