One week up, one week down. That's the market summary and it would continue for next few months with DOW hovering around 10000 (with range from 9500 to 10500). So it is ideal time to do some balancing of portfolio to protect the yearly gains and move the money into safer alternatives. All year round, most of my recommendations were in high beta stocks. Many of them did extremely well (e. XL, HIG, LNC, HUN, IDG and many others). Some of them were duds (CIT-A, DRYS). Winners outpaced losers by 3:1 margin. So now it is time to lock and protect those gains.
Here is high-level portfolio allocation recommendation - it may change based on individual age and risk tolerance and many other factors.
If your age is between 30-40:
- Bonds, CDs, cash and bond mutual funds: 25%
- Stocks, Preferred stocks and equity mutual funds: 75%
If your age is between 40-50:
- Bonds, CDs, cash and bond mutual funds: 35-40%
- Stocks, Preferred stocks and equity mutual funds: 60-65%
If your age is between 50-60:
- Bonds, CDs, cash and bond mutual funds: 50%
- Stocks, Preferred stocks and equity mutual funds: 50%
So now that markets had reached short-term equilibrium, it's time to move some of the stocks into balanced mutual funds. Here are two of my recommendations in this area:
Vanguard Wellesley Income
(MUTF:VWINX). The investment seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation. The fund invests approximately 60% to 65% of assets in investment-grade corporate, U.S. Treasury, and government agency bonds, as well as mortgage-backed securities. The remaining 35% to 40% of fund assets are invested in common stocks of companies that have a history of above-average dividends or expectations of increasing dividends.Vanguard STAR
(MUTF:VGSTX): The investment seeks long-term capital appreciation and income. The fund invests in a diversified group of other Vanguard mutual funds, rather than in individual securities. The Fund follows a balanced investment approach by placing 60% to 70% of its assets in common stocks through eight stock funds; 20% to 30% of its assets in bonds through two bond funds
For a change, these are low beta, stable recommendations. With vanguard, one does not have to worry about costs since both these have very low expense ratios and long history. Use your own due-diligence and do portfolio balancing based on your criteria.
Have a good week !
/Shyam
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