Will a balanced 60/40% stock/bond portfolio smooth the investing roller coaster ride? Well, it all depends on how many years you have to work with. And I would say a minimum of a decade, maybe more. Don't forget the S&P 500 index's 12 1/2 year zero return from 2000 to 2013.
So, the important question is, "protect me" from what?
- From retirement failure (running out of money)? Not really.
- From market volatility (we've seen bonds tank right along with stocks)? Not at all.
- From Sequence of Returns risk? (the bad luck of retiring just before a major correction). Nope.
As my brilliant corporate IT friend Bill pointed out to me, "Which of these years [in the chart at the link below] is not like the others [so far]?"
This is why I, many academics such as Wade Pfau and an increasing (but still very disappointing) number of advisers are using indexed annuities as partial or total bond substitutes. Not to mention the guaranteed lifetime income they offer- if selected -and long term care benefits of some contracts.
Sorry you have to click on the link. I couldn't get the image to display correctly.
Gary
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