Mix up those investments – for your age and risk tolerance.

I am not an investment expert, but I know the basics and I know where to seek help. I know that having the appropriate mix of investments is important and that the desirable mix changes over time and with circumstances. I also know it pays to obtain the expert advice you need.

When you are young your goal is probably growth and as you get nearer and into retirement you want less risk, to preserve your assets, income, but also growth to at least keep up with inflation.

That means you need a mix of investments to give you the best chance of meeting your goals. I say best chance because there are no guarantees, you do the best you can.

I am 75 and have been retired since January 2010. Following is the allocation of investments in my 401k plan. As you can see, the plan record keeper (a major investment firm) says I’m on target. That’s nice to know, but there is more to the story.

This type of guidance is available through most 401k plans, but sadly it’s questionable how much it is used by participants.

Also, there are drawbacks with this information. It may, as in my case, exclude the total investment picture. Over the years I accumulated my employer stock and remain invested in the dividend reinvestment plan, an income stream. I have also invested in various mutual funds, including municipal bond funds (another income stream) so my total mix of investments is quite different from just my 401k.

But the good news is that many 401k record keepers and others offer more than the limited picture. They provide a total retirement planner. These tools allow you to enter all your investments and obtain the total picture of how you are doing with your growth, income and risk objectives. With this information you can then adjust you 401k and/or other investments and also maintain the appropriate mix over time.

It is very important to use a total view your retirement investment goals including qualified plans such as 401ks, and IRAs, non-qualified investments, cash savings and income streams such as Social Security and even a pension.

You cannot meet your retirement objectives without considering the big picture.

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One comment

  1. You bring up several good points here about diversifying and knowing your total portfolio from all sources. Two questions that I always had and I have not found a financial advisor who could answer my questions to my satisfaction are: 1) What is an American company or a foreign company these days in the global economy? 2) How do I know when I end up with too much stock of one company?

    My first question which usually cause the advisors to scratch their heads is a company like Apple or Microsoft. Are these global companies more affect by foreign sales or politics or by American? The same can be said about auto makers. No two answers are the same. I ask this because American companies are not bring the cash home to pay dividends. What is a developing country stock these days. It is such a shifting standard over time, I do not think that there is a good hard rule that you can follow but requires constant review.

    My second question is how do I know when all my various index funds from different funds / 401Ks buy too much of the same stock. I do not want my combine portfolio to end up with 40% of Enron or something like that. I talked with one broker who claimed that his company used some software to analyze my whole portfolio from all sources to ensure that this did not happen. I was all set to turn control over to this guy and I never heard from him again. I guess he figured that he could not make any commissions off of me since I was in it for the long term and I was not going to be able to flip stocks every month on me.

    The best I can do is that I keep a Excel spreadsheet and read my statements and prospectus and ask questions when my percentages and balances are no longer maintaining the “norm”. In truth, it is the only place that I can see my cash, bonds, and CDs side-by-side next to my other investments since they are not in managed or broker accounts. When you see your cash alongside other stable value funds, sometimes you wonder if you have enough in investments for growth.

    In retirement, I like to think that my job is now CFO. Money management, ensuring proper cash flow and getting the best ROR that I can is my job. I know some people that think retirement is to spend all their money and do not understand how they are broke all the time.


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