My sister wrote yesterday that their financial advisor is pessimistic about economic and market outlooks for the next several months. She asked what I think. Here is what I sent her, somewhat edited:
- Until 2005, we had all my pension funds in equities (common stocks). We cut that back to 30% then. That meant the crash in 2007-8 didn't hurt us much but we also missed the massive upswing in the markets after that. But since I know I will never be able to time market swings, that doesn't bother me a whole heckuva lot. I do know that I would be VERY uncomfortable if we lost half the market value of my pension fund, so I am not willing to try to ride out any huge dips in the stock market with too much invested in stocks.
- Right now we have scaled back our investments in stocks to only 25% of our portfolio, and I'm seriously considering cutting it back to only about 20%. [side note: Because of the US tax laws, I must invest in individual stocks and cannot buy mutual funds ARRGGHHH].
- We have about 35% of our investments in high-quality corporate bonds. We'll take a hit on these because as interest rates go up, bond prices go down. We can live with this.
- The rest is in short-term money market stuff: short-term gubmnt bonds and treasury bills.