Sunday, June 06, 2010

Support For Why 60% In Stocks Is Too High For Retirees/Pre-Retirees, At This Time

Recent bulletins to clients of my advisory firm, Wade Financial Group, Inc., have focused on why I believe that a 60% allocation to stocks is too high at this point in the economic cycle. The chart below makes a very important point: You must have a VERY long-term time frame for the odds to be in your favor-and that's IF you start retirement from a favorable stock market valuation.

Percentage chance of exceeding a 3% "real return" (return after inflation) with a 60% equity and 40% bonds portfolio (1889-2008)

Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the momentum of the herd vs. fundamental valuations.

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