Finding Your Balance by Dennis Friedman
If I were 40 years younger, I might be rattled by the stock market selloff on Thursday, the day after the President's tariff announcement. Back then, I was living in a studio apartment above a garage on an alley, trying to make ends meet while saving to buy a home. My investments were mostly in the U.S. stock market and cash.
Today, Rachel and I find ourselves in a different place. We're a retired couple whose house is paid off, and our investment portfolio doesn't only consist of U.S. stocks; we also own plenty of bonds and international stocks that helped cushion the selloff yesterday. Our broad-diversified portfolio of 45% stocks, 45% bonds, and 10% cash will never earn us bragging rights in the investment arena, but it does give us a steely spine in times like this.
I’m not advocating for an asset allocation like ours because we all have different financial goals, time horizons, and risk tolerances. But this old-fashioned approach of investing in low-cost, diversified index funds spread across U.S. stocks, international stocks, and bonds seems to have worked for us over the years.
I don’t think anyone knows how long this economic upheaval will last, but I do believe we have enough cash and high-quality bonds to ride out this stock market downturn. More importantly, I sleep well at night.
At age 73, I realize there are other things in life that can be more unsettling than the horrendous selloff we just experienced. Losing your health or a loved one can put things in perspective when facing a down market, especially when holding on to diversified investments usually doesn’t result in a loss.
I admit we did make one emotional decision before the tariffs took effect. We sped up the purchase of a laptop computer and an iPad prior to the President announcing his tariff policy. But that will probably be the only thing we’ll do in this economic environment, other than rebalancing our portfolio to our target asset allocation.
Today, Rachel and I find ourselves in a different place. We're a retired couple whose house is paid off, and our investment portfolio doesn't only consist of U.S. stocks; we also own plenty of bonds and international stocks that helped cushion the selloff yesterday. Our broad-diversified portfolio of 45% stocks, 45% bonds, and 10% cash will never earn us bragging rights in the investment arena, but it does give us a steely spine in times like this.
I’m not advocating for an asset allocation like ours because we all have different financial goals, time horizons, and risk tolerances. But this old-fashioned approach of investing in low-cost, diversified index funds spread across U.S. stocks, international stocks, and bonds seems to have worked for us over the years.
I don’t think anyone knows how long this economic upheaval will last, but I do believe we have enough cash and high-quality bonds to ride out this stock market downturn. More importantly, I sleep well at night.
At age 73, I realize there are other things in life that can be more unsettling than the horrendous selloff we just experienced. Losing your health or a loved one can put things in perspective when facing a down market, especially when holding on to diversified investments usually doesn’t result in a loss.
I admit we did make one emotional decision before the tariffs took effect. We sped up the purchase of a laptop computer and an iPad prior to the President announcing his tariff policy. But that will probably be the only thing we’ll do in this economic environment, other than rebalancing our portfolio to our target asset allocation.
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