Ask Bud - Portfolio Allocation Advice in a Changed Economy | 2010

Question: I read both of Bud's books 18 month’s ago. I’m now 62 and “retired” prematurely. With economy changed from two years ago has Bud’s advice changed - i.e. stocks vs bonds? Is there an update I should consider as I implement Bud’s recommendations?

Answer from Bud:

Thank you for asking. My advice has been constant over the years and sometimes criticized for being too conservative. I believe those critics must have learned something in the past ten years. I still adhere to an age related allocation, but being even more cautious in the last decade of continued debt building in every sector from government to credit cards, I’ve put more emphasis on more conservative picks within the allocation categories. For example, in the fixed-income category, early in the decade I invested more in Savings I Bonds and immediate annuities with inflation-adjustments. (Those aren’t as attractive now as they were when I invested, but are still better than a lot of other opportunities for capital preservation and some inflation protection.) More recently I invested in CDs and have lots more in money markets than in the past. In the equities area, I shed REITs early in the decade sensing the real estate bubble. I emphasized tax-managed index funds in large cap stocks. Next year I'll go for an IRA to Roth conversion containing TIPS initially and eventually some REITs. When interest rates go up some, I’ll think about some more in immediate annuities. Neither industry nor the government will acknowledge that it will take decades for us to recover from too much consumerism and debt which have left a legacy of debt that will continue to be crippling. Bud

H. K. Bud Hebeler is author of J.K. Lasser's Your Winning Retirement Plan, Getting Started in a Financially Secure Retirement, and retirement articles on www.analyzenow.com. He is often quoted in The Wall Street Journal and other financial publications.

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