In another two weeks, it’ll be the end of the financial quarter and statements from investment companies will start coming for those in a position to have retirement savings.
What if you need your money in two years, 10 years or 25 years? It makes a huge difference about how to think about this coronavirus quarter.
Veteran investor Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management, makes sense of this moment with a quick tip on how we should be thinking about things.
“In fact, those are three very different portfolios,” Ritholtz told Marketplace’s David Brancaccio. “If you have to, have to, have your money in two years, and you want to take very little risk, you’re going to be in a combination of money market funds, and some high quality corporates. And that’s a very low risk, very low return portfolio that hopefully just keeps ahead of inflation.
“Historically, we rarely see 10 years go by without a positive return. So a portfolio that makes more sense for a person who’s going to need that cash in a decade is going to be something like a 60/40 classic portfolio, that’s 60% broad market indexes and 40% bonds. You should see a better-than-inflation return in most 10 year periods.
“And then 25 years — 25 years is a long time in the stock market. And you would want to be pretty aggressive, either 70/30 or 75/25 stocks and bonds. The reason I never recommend people go all stock, even though that portfolio would do better, is exactly because of times like this, or ’08/’09, or 2000. You know, the optimal portfolio isn’t the one that returns the most money, but it’s the one that you can live with. And I can guarantee you that people who are in all stock portfolios, they’re having a hard time looking at a market that was hitting all time highs a month ago, and now is down 30% or more. We’ve seen $20 trillion in wealth disappear.
“Now, it’s only temporary. My best guess is once we get through the coronavirus, it’ll come snapping back. But if you’re up all night stressing over it, and the only way you relieve that stress is selling, well, then you’re not going to participate when the market recovers. You have to take the good with the bad, and this too shall pass.”
Related Stories
If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air. But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.
Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.
When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.
