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Pick a Strategy, Any Strategy!

Photo by Brian Smithson

Or not, same thing.

Someone once told me that the best investing strategy is just to have one (a strategy) and stick with it. An article in today’s New York Times suggests that you might not even need a strategy-just some no-load, low-cost mutual funds. “The Odds for a Retirement Nest Egg, Recalculated,” by Mark Hulbert, cites research that challenges a commonly followed investing strategy of investing a high percentage of your portfolio in high-risk equities and a smaller portion of the portfolio in lower-risk bonds when you are young, and then gradually reducing the equities portion and increasing your bonds portion as you get older.

The study used a computer simulation to forecast the performance of a 35-year-old trying to amass $1 million by age 65, by investing $11,000 per year and using different beginning mixes of stocks and bonds, and then either keeping the mix the same or gradually making it more “conservative” by increasing the ratio of bonds to stocks.

Their research concluded that it’s best to just pick an allocation (60% stocks/40% bonds or 40% stocks/60% bonds, or whatever) and stick with it, whatever it is. Plus, if you decide to invest this way, you get the added benefit of not having to pay the “rebalancing” or “lifecycle” fees of lifecycle and target retirement funds that automatically adjust your fund mix to make it more conservative. I’m not sure if I buy this “no strategy” strategy-what do you think?

Post Your Comments

What’s your investing strategy?

Have you tried switching strategies? How has that worked out for you?

When was the last time you even looked at your asset allocation and made changes?

What type of asset allocation feels right for you?