Portfolio Allocation - Bonds
Helping a relative who will retire in ~10 years.
How do you guys think about bonds these days? Do the traditional allocation ratios for equities/bond hold in an environment where rates are low as they will be?
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I don't think any non-expert should be in bonds right now with whats being said about a rate hike.
Yeah that makes sense. Do vanguard type funds available through 401ks qualify as expertly managed?
If a 60/40 equities/FI allocation held a certain level of risk historically, do people assume that actively managed portfolio's hold the same risk these days? Or are we in a different paradigm?
you should tell your relative to go see an FA. They have institutional support. You're very likely to screw this up. We have never had a market propped up the way it is, and we are considering unpropping it. It's going to be almost impossible to pick the details on what will happen even if you can pick the overall picture. On top of the U.S. unpropping, we have the grexit going on as well as China going down. If you're having to ask, you probably shouldn't give your relative the answers. You don't want to be on the hook for ruining their retirement as it will ruin the relationship. Let them hate an FA.
the best piece of financial advice I can give you is to not take advice from WSO (aside from DickFuld and DingDong)
it all depends on his risk tolerance, his ability to stay invested is much more important than the exactly right allocation. it also depends on how he's invested now. for example, if he's 100% stocks right now, it definitely makes sense to dollar cost out of some of that exposure to bonds and alts. make sure some of the bonds are nontraditional. on the other hand, if he's 50/50 stocks/bonds right now, no sense in changing that.
I'd recommend he visit with an advisor though. I have a blog post that has advice on how to find a good one.
Thanks for the info. I can assure you guys I won't be making any decisions based on what I read here.
There is an advisor involved, but given the relative's location, there is a lot of variation in education and training among advisors, and I want to be able to keep an idea on the advice they are given.
I'll read your blog post about advisors - that should be useful.
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