If you're 10 or more years away from retirement, how do you fix a retirement portfolio that's been broken by recent investment conditions? If you sell your equities now, you lock in losses and reduce the potential return on your portfolio. But if you don't start moving towards a more conservative investment mix, you may be worried that stocks will never return to their former levels. Frank Armstrong and Paul Brown suggest a unique approach to solve this dilemma in their book Save Your Retirement (available at Amazon.com and BarnesandNoble.com).
Here is what the authors suggest.
- Stay the course with your current portfolio. Don't sell your stock funds even though they may have bounced back somewhat from their lows reached earlier in they year.
- Put all of your future retirement contributions into the fixed income side of your portfolio.
This has the net effect of adding fixed income investments to your portfolio gradually over time and giving the equity side of the portfolio time to grow. Your portfolio mix will become more conservative as you glide towards retirement. This approach seems like a very good idea to me. Thanks for suggesting it, Frank and Paul.
For more information: check out Frank and Paul's web site for more retirement planning information, useful tools and calculators; it's called "Sink or Swim" -- great title
Comments
I am curious about your advice to pre-retirees to put all future contributions into fixed income; sounds like a little more elaboration; for example: avoid bond funds that have longer durations as they will get whipsawed when interest rates start to rise; laddered fixed income portfolios are the only ones that will survive the rapid rise in interest rates that are likely on the horizon!
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