You always hear how a well-balanced life is a good thing, right? The same can be true for a well-balanced portfolio. But lately, there’s been pushback on the traditional balanced portfolio of 60/40 (stocks/bonds).
The argument being made is that bonds aren’t what they used to be in terms of a counterbalance because they’re going to get eaten alive by inflation.
News flash. We’ve been dealing with inflation long before today. It’s the business of government.
Also, we need to make a couple distinctions here. Let’s be clear about how a balanced portfolio is talked about in the press. It’s usually in a discussion about college endowments or huge pensions that own bonds going out 30 years. That’s not the timeline for you.
And you are the investor I’m writing to. The one I care about. You, for example, are worried about next month’s new car purchase, next year’s river cruise, and all the trips you want to take with your hard-earned money. We are not trying to figure out how the endowment will offer some kid a scholarship or how to kick an underfunded pension down the road.
And most importantly, when it comes to investing, I want you to be cognizant of where your money sits in the capital structure. If you are a bondholder, that places you above common stockholders. And what that means is, you get paid before they do.
Action Line: Crafting a portfolio that’s right for you is more art than science. A balanced portfolio is far from dead. When you want to talk, let’s talk. Email me at ejsmith@yoursurvivalguy.com.
Read the entire series here.
Originally posted on Your Survival Guy.