Everything in moderation. There’s something to that advice for building a retirement portfolio, according to one expert.
“When you hear about investments, people’s mindset goes immediately to stocks,” Mitlin Financial founder Lawrence Sprung, who is also the author of “Financial Planning Made Personal,” recently told Yahoo Finance Live (video above). “And it doesn’t have to just be stocks. You want to build out a balanced portfolio.”
That includes assessing your risk tolerance and time horizon and diversifying your portfolio with stocks, less volatile investments like bonds or total stock market index funds — mutual funds that track the total returns of the entire US market — and perhaps a dash of alternatives.
In fact, with the market uncertainty of the past year or so, it’s safer to be as diversified as possible.
“It’s really up to each individual to build out an asset allocation that is right for them,” Sprung said. “That’s going to include stocks, that’s going to include bonds. And within stocks, that may include several different types of stocks, large-cap, mid-cap, small-cap. Bonds may include government bonds, international.”
You might also consider making some new retirement plan contributions into an alternative investment, like a real estate investment trust or a mutual fund that buys them. Commodities might be a good place for an inflation hedge, he added. “Real estate is another good option.”
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How much in stocks?
Owning stock is essential for those who have a long-term horizon, say, two decades, until they plan to start dipping into their savings. And the standard piece of advice has been to take 100 or 110 minus your age and that’s the percentage of your retirement savings that should be invested in equities.
For a 57-year-old, for instance, her retirement account might be 65% in stocks and 35% in bonds — a breakdown that suits her age if she has a moderately aggressive risk tolerance.
That’s to take advantage of the upside potential growth over time that stocks typically deliver when compared with fixed-rate options such as bonds, money market, or certificates of deposit.
But when the stock market is on a tear, it’s tempting to go a bit bonkers. Discipline is critical. When you let the stock portion of your portfolio get overweighted, it makes your savings vulnerable when the market turns south.
Other income streams
There are myriad channels you may have to tap for retirement income from a traditional pension to your employer-provided retirement plan, such as a 401(k), to income-producing real estate properties or a small business you own. Whatever that may be, it’s something that folks should start considering and more importantly planning for.
While rental properties could be part of your retirement plan, many retirees don’t want the hassles of managing that kind of investment.
“If you’re not somebody who wants to be that owner-operator, you could look at real estate investment trusts, where you’re going to own a piece of a portfolio and perhaps get an income stream,” Sprung said. “There’s really a flavor for everyone, it’s just a matter of finding what’s right for you in terms of what your goals are, your risk profile, and what your time horizon is.”
Of course, there are plenty of other alternative investments that people dabble in, but they are often riskier.
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“I don’t think the average person has the ability necessarily to invest in a wine collection unless they’re doing it in some kind of private placement and group platform,” he said. “Crypto obviously is a little more accessible. Crypto is something that they can in most cases easily convert to cash, assuming that crypto is still around and viable.”
Social Security has always been a major income stream that retirees rely on. But Social Security’s reserves are projected to run out in 2033 if Congress doesn’t act. At that point, Social Security will only cover 77% of full benefits.
It’s a big problem, and one that Capitol Hill is not yet acting on, which raises the question of whether millennials and Gen Zers should expect to lean on Social Security as income in retirement.
“The reality is the vast majority of folks who are retiring are really relying heavily on Social Security,” Sprung said. “It’s important to the fabric of the country to maintain that status of Social Security. So I don’t think they’re going to get rid of it, but they are going to tweak it.”
“So it’s going to be very important for people like millennials to make sure that they’re positioning themselves in a way to have other income streams.”
Kerry Hannon is a Senior Reporter and Columnist at Yahoo Finance. She is a workplace futurist, a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on Twitter @kerryhannon.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
