I’m a 76-year-old widow with a mortgage of $153,000, with $73,000 in investments and $20,000 in a high-yield savings account. My Social Security and very small pensions give me a monthly income of $3,400 per month. I am saving about $400 per month, splitting it between my bank savings ($100), my high-yield account ($200) and my investments ($100).
My investments are split 50% stocks and 50% bonds. It seems like the stocks have made money, but the bonds have lost money. My investments have remained around $73,000 for the past two years, in spite of the $100 a month I’ve invested.
Does the old adage still hold true that at this age — that it’s best to split investments 50/50 in stocks and bonds? It appears that had I had more in stocks, I would have made more money over the past couple of years. Given the market these days, is there a better way to diversify investments?
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
Dear Reader,
Actually, at your age, the old adage would probably be to have more in bonds than in stocks, as the former tend to be more conservative. That said, it isn’t the right move for everybody and your investments should be allocated to best fit your interests and goals.
Many people have been upset with the way their investment portfolios performed in the last couple of years, so you’re certainly not alone. But it is best not to act on past performance when investing, particularly over the short term, so don’t change your portfolio for that reason alone.
It is healthy, however, to do a checkup on your asset allocation. Conduct a deep dive into your stocks and bonds. What are you exactly invested in? Then circle back to your financial plan. If you don’t have one, get started immediately.
Take account of your assets and liabilities, review how much money you spend (or need to spend) every year, and where that fits in with your income. Take into consideration how those expenses may change in the future, for both short-term and long-term purposes.
Attempt to figure out how much money you need for the rest of your life. It is a hard exercise, and not a number you can pinpoint, but try this rule of thumb: Multiply your expected monthly expenses by 12 and then multiply that figure by 25. That is a very broad calculation. Keep in mind there are many factors that would affect that figure, including inflation, interest rates, emergencies, medical expenses, and so on.
Risk tolerance vs. risk capacity
Even if you are leaning toward riskier options, you might not be able to do so and realistically or reasonably achieve your goals. There are two terms to know here: risk tolerance and risk capacity. The former is how much risk you can stomach, such as emotionally handling a drop in your retirement account balance after a bad year. The latter is how much risk your finances can handle without going off course for your financial needs and goals.
It is fantastic that you’re able to save some of your income. If you don’t want to rock the boat on your current investment portfolio, open a separate investment account where you contribute a small portion of your excess income every month, and choose a higher allocation toward stocks.
Just be sure that this account, or any other endeavor you consider, does not take away from the plan that will keep you financially afloat and comfortable in your old age. Your retirement assets are not something you want to gamble.
Consult a qualified and trustworthy financial planner who can walk you through specific investment options and create a more customized asset allocation for you. Perhaps the 50/50 strategy is right for you, but the sooner you determine that, the better for your future and finances.
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.
