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Carl Richards: An Investment Lifeboat Drill Now Can Help Weather Future Disaster
I'm look at this article from the eyes of retiree in their distribution phase of life.
Retirees can't depend on current working income to buy "assets on the cheap" when markets periodically correct. When trying to ride out a correction as a retiree, one needs enough near cash (for distributions) to allow riskier assets time to recover. This could be years.
I'm wondering what role treasuries and hard assets should play in these retiree's "distribution phase" portfolio? What other investments will help counters equity volatility? Corrections happen for different reasons and therefore a portfolio needs components that aide in a "flight to safety" scenario, a "sudden inflation" scenario, or "long drawn out deflationary" scenario.
Treasuries have often been associated with aiding a "flight to safety" scenario, but they also pose a risk to the portfolio in a raising interest rate scenario. Hard assets have served as a currency hedge as well as a inflationary hedge, but hard asset remain vulnerable to long drawn out deflationary pressures of deleveraging.
What's an old dog to do?
Some thoughts: -Have cash (near cash) for portfolio distributions of 4 years. -Have near cash (or treasuries) for flight to safety corrections and have a equity buying discipline when these corrections occur. -Periodically reallocate some equity gains to cheap hard assets during deflationary periods. -Periodically reallocate some equity gains to Inflationary protected assets. Most of us have forgotten what these assets are (RE, I-bonds, Energy, and maybe even undervalued equities).
Comments
I'm look at this article from the eyes of retiree in their distribution phase of life.
Retirees can't depend on current working income to buy "assets on the cheap" when markets periodically correct. When trying to ride out a correction as a retiree, one needs enough near cash (for distributions) to allow riskier assets time to recover. This could be years.
I'm wondering what role treasuries and hard assets should play in these retiree's "distribution phase" portfolio? What other investments will help counters equity volatility? Corrections happen for different reasons and therefore a portfolio needs components that aide in a "flight to safety" scenario, a "sudden inflation" scenario, or "long drawn out deflationary" scenario.
Treasuries have often been associated with aiding a "flight to safety" scenario, but they also pose a risk to the portfolio in a raising interest rate scenario. Hard assets have served as a currency hedge as well as a inflationary hedge, but hard asset remain vulnerable to long drawn out deflationary pressures of deleveraging.
What's an old dog to do?
Some thoughts:
-Have cash (near cash) for portfolio distributions of 4 years.
-Have near cash (or treasuries) for flight to safety corrections and have a equity buying discipline when these corrections occur.
-Periodically reallocate some equity gains to cheap hard assets during deflationary periods.
-Periodically reallocate some equity gains to Inflationary protected assets. Most of us have forgotten what these assets are (RE, I-bonds, Energy, and maybe even undervalued equities).