With the recent market ups and downs, it is easy to revert back to the same feelings we all had in 2008-2009. The feeling of being out of control can become overwhelming; the fear of losing our hard-earned money in the market becomes unbearable. The “quick fix” we hear fearful clients ask for is to simply get out of stocks and go into bonds, since this will reduce the risk in their portfolios.
Mark Miller wrote an article about older investors moving away from equities and into bond portfolios. He highlights a study released by the Putnam Institute where their “experts” are saying a retiree should only have 25% of their portfolio in stocks, even though most of the research tells us to stay above 50%.
Our philosophy is to keep all of our clients, including retirees, in the stock market while having our retired clients create a cash fund that equals several years of retirement living expenses. This fund provides cash on a monthly basis, and allows the portfolio to go up and down without affecting the client’s cash withdrawals.