The 50-50 Solution: Stocks and Bonds in One Portfolio

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Photo Credit: seekingalpha.com | Author: Jeff Sommer | Source: New York Times |

The question in this market is: do you do nothing or do you jump into the icy waters and try to navigate towards a profit?  I’ve always been a believer that even in the worst of markets, you can still be fully invested.  This means that sticking money under the mattress may seem smart when the market falls and falls, but in the short to long run it will harm your ability to fight inflation and provide the retirement income you need.  So what to do?

There are many investment options around and remember they don’t all move together – down or up.  My friends who love gold have been singing me its praises for years.  I still believe in this country and its people to think that were not on the edge of armageddon just yet so there may be a reason to still consider stocks and bonds, which can be two investments that move differently from each other.  So if you’re invested in both of those investments, how will you fare in this investment landscape?

In the article link below, it states, “Put simply, bonds tend to outperform stocks when a recession is on the horizon, while stocks tend to rally when an economic expansion is in the offing. Predicting the economy’s direction is famously difficult. So unless you have substantial bond holdings in your portfolio well before a recessions begin, you’ll miss upturns in the bond market. And unless you’re holding stocks before an economic recovery has started, you’ll miss those big rallies. By holding stocks and bonds in equal proportion — a portfolio that’s easy to construct by using index funds — you won’t need to be prescient; you can stick to your portfolio and ride out the storms.

So, how does one play the stock and bond 50/50 portfolio game?  Check out the article from Jeff Sommer in the NY Times and provide your thoughts and insights.

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check out the the original article from New York Times, written by Jeff Sommer

Comments

  1. Thanks for sharing this NYT article, I had not seen it. Whether 50/50 or some other mix, a properly balanced portfolio is generally the right answer for most investors. The news media often writes about the “Lost Decade” for stocks and for investors. This is true for investors in many large cap stocks and/or funds. However, properly diversified portfolios did pretty well over the course of the “Lost Decade.” In my opinion, investing should be an outgrowth of proper financial planning.

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