At the age of 50,what percentage of stocks should a middle income client have in their potfolio?
A lot of it depends on when you are going to start withdrawing money from your portfolio. By age 50 you are definatly going to want to have a less agressive portfolio. The most important thing is to be well diversified. I would not recomend selling your stocks you have now and investing in bonds because the market is way to under valued. If you are not going to retire untill 62 you should keep your current investments until the market rebounds and then shift some of your stocks into money markets and bonds. I would say at least 50 percent. By 60 you will want to have only about 25% of your portfolio in stocks.
At any age and any income level, I believe that 75% to 85% of your savings should be in mutual funds. Not just any mutual fund though.
The best fund be right now is the vanguard index funds, why? because they are the easiest and the cheapest to control and maintain plus they mirror the markets.
(1) While most funds charge as much as $67. per $1000.of savings for fees, the vanguard funds cost 0.18% or $1.80 for every $1000. of savings.
(2) Because these funds are index funds they will do as good as the market does.
(3) Here is how I would brake it down:
15%-20 % of your money into the US large cap index funds,
15%-20% into US small cap, index funds,
15% -20% into emerging markets index funds,
15% into Asia pacific index funds,
15%-20% into euro index funds,
10% into the mining and natural resources index funds and
10% into precious metals index funds.
If you set up your savings like this you will only have to check it once or twice per year.
Considering that the market is so skitterish, and so jumpy about world affairs, I'd go with a few quality blue chip stocks; proven performers that have not been subject to wild fluctuations. This will provide a solid base to work from in your later years. The idea -- in these days of uncertainty -- is to not make money but to merely survive at a break-even pace until the fog clears. The debacle with Greece and the Euro has not yet begun, and Spain, Argentina, Venezuela, California -- and possibly the United States in five years' time -- are ripe for insolvency. This will send the market plunging. Many are finding refuge in bonds.
Throw away the playbook. The entire globe is heading into uncharted waters. Already we have been faced with unprecedented situations that have called for creative (i.e., previously untried) solutions. So take your knowledge and common sense and go with a conservative game plan. I'd go with about 40 percent stocks in a portfolio.
I would also check your financial holdings frequently as the market is manic. Land is usually a good investment. Some people are cashing in everything they have to buy gold.
A major consideration is what is the size of the portfolio. Are you including real estate as part of your portfolio? Precious metals?
If you mean by portfolio that which is with a stock broker, I like a stock-cash only mix. By stock, I mean mostly ETFs.
No bonds. If you are looking for income, I don't like bonds. If you are looking for capital preservation, I don't like bonds.
If you are looking for income, look into covered call selling or options spreads. That takes a LOT of knowledge and ability, though.
Determining the ratio of cash to stocks depends on market conditions. THAT is a difficult parameter to determine.
One approach is Lichello's "Automatic Investment Management". (Note that it is not really automatic in practice).
BTW, I am not a licensed or brainwashed securities "professional" or "investment adviser".
By the age of 50, I think the investment portfolio should be more conservative. Hold mainly blue chips and also diversify your investment in real estate, gold and may be foregin currency. Always keep a portion of cash. I think stock should be less than 40% of your portfolio, but try to hold more asset that can generate passive income like real estate and quality bond.
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