Asset allocation is the one question that I get every day, which I absolutely cannot answer.
The reason is simple: no two investors are alike.
The answer varies whether you are young or old, have $1,000 in the bank or $1 billion, are a sophisticated investor or an average Joe, are in the top or the bottom tax bracket, and so on.
This is something you should ask your financial advisor if you haven’t fired him already, which you probably should.
Having said all that, there is one old hard and fast rule, which you should probably follow.
It is prudent to own your age in bonds. So, if you were 70, you should have had 70% of your assets in fixed-income instruments and 30% in equities.
That’s a lot easier to do today because 90-day T-bills yield an astonishing 5.4% while ten-year bonds bring in 3.6%.
You can also add high dividend-paying stocks for bonds. You can get 5% a year or more in yields these days, and get a great inflation hedge, to boot. Crown Castle International (CCI) is now paying a 5.5% dividend and last time I checked they are still building 5G cell phone towers, (CCI)’s specialty.
You will also own what everyone else in the world is trying to buy right now, high growth US stocks, the big FANG’s.
You will get this higher return at the expense of higher volatility. So just turn the TV off on the down days so you won’t get panicked out at the bottom.
That is until we hit the next recession. Then all bets are off.
I hope this helps.
John Thomas
The Diary of a Mad Hedge Fund Trader
It's Time for the Wakeup Call
