I am 66 years old and have managed my own fund choices since 2018 and I have dutifully followed the advice of lowering my exposure to the stock market as I get closer to retirement. So, since June of 2018 I have been very close to a 50-50 Stock Bond portfolio with the stocks weighted towards the value end vs the growth end. The bond portfolio was weighted to the short end of the duration. Almost all of my fund choices can be found in the Great owls or the Honor Roll as described on this website. I just did an analysis of my past 5.75 years relative to if I had just left everything invested in the S&P 500.
The results are disappointing, and I do not understand the reasoning now of the balanced fund approach etc. So my overall return in this time period was 32% which works out to be 5.54% annually. The S&P 500 returned 84.09% or 14.62% annually. In real dollars I went from 660K to 871K. The S&P 500 would had taken me to 1.44Million.
In the up markets I got on average 61% of the return of the S&P 500 which I am okay with because I was not exposed as much to the market.
It's the down market. I managed to capture 85% of the down market, The Bond portfolio failed to moderate the losses. In 2022 in a down market I captured 107% of the loss suffered by the S&P 500 I was invested at 52% stocks and 48% the whole time period in 2022.
I am slowly learning that almost all financial advisor advice is BS sorry for my French.
Comments
You made the correct decision on short duration bonds in a rising rate environment (2022-2023). What you planning to do when the FED cut rate in June/July? Moving to intermediate term bonds incrementally would be appropriate to take advantage of increase bond prices.
Exactamente. Flexibility to adjust investments is necessary to agree with the medium to long-term financial environment. Nothing always works "best" all the time.
NOTE: the formatting is a bit clunky.
Personal summary/note: one doesn't need to be excessively involved in a complex portfolio to have a decent return over time.
Of course, this portfolio would not be a money maker or not a likely suggestion from an adviser.
Lazy portfolio? That's for other investors.
I now know enough about my financial capabilities to know that they are almost non-existent. No more tinkering !!!
I agree on the first part, but from just as it's pointless to ..... I'm of the opposite thinking.
When it comes to sports, ever team try's to figure out how to stop the other team from scoring or how to score on the opposition. Right now the process is taking place in the NCAA men's & women's basketball championship.
Just saying, Derf
As for the rest of life, a little reflection on how you got where you are isn't a bad thing. As Plato quotes Socrates: "The unexamined life isn't worth living."
The others are spot-on. The S&P has been on a romp for many years. Value stocks have suffered. Most of us reach an age where not losing money becomes more important than out-running the indexes. So a defensively positioned investor should not expect to beat the market. Plus, indexes are just that. They do not reflect the impact of management fees, trading costs, record keeping and other “real world” expenses. Take all fund ratings with a grain of salt. Sometimes they’re indicative of future performance. But not always.
You are correct that most balanced funds didn’t protect in 2022. With the 10-year sitting somewhere around 1 or 2% bonds were a dicey proposition in the years preceding ‘22. I’m not even confident the 4.2% today is attractive - but it’s a lot better than a few years ago. That said, I think 2022 was a bit of an outlier in terms of the carnage bond funds suffered.
All depends on needs and your own risk tolerance, but for future reading you might take a look at alternative funds. They’ve received a lot of press in recent years owing perhaps to the issues with balanced funds you mention. Like any sector - some good ones and plenty of bad as well.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4vhQGHbukxEcsI0ZPsyD7X