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|Why a balanced portfolio may not work.|
Posted by CoolHand on 5/17 at 11:07 amI'm starting to see a lot of articles lately challenging the general consensus on long term investing. Here is the latest I've read:
First, the article points to a 60/40 ratio of stocks/bonds being the status quo (even siting target retirement). Is that true? I know Vanguard's 2040 is more like 90/10.
When anyone mentions investing in commodities as a sound strategy, I start questioning their advice.
Did he not use this strategy when doing his original analysis? Seems a no brainer that you'd use this strategy preparing for retirement. I would imagine those using a target retirement are doing this.
I'm seeing a lot of articles warning against long term stock investments, but the way I feel about it, if the stock market doesn't do better than 8% over the long haul., we're all in trouble anyway.
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Some people (myself included) make investing way too complicated and are focused on catching this newest fad or getting a jump on what is to come. Companies like MCD have simple proven businesses models, pricing power, and ability to grow earnings and dividends over time should consistantly provide ample returns.
I'm not saying that MCD is a simple retirement solution, but play around with this site too.
Say you buy 100 shares today at $91. Grow the dividend at 8% (which they have), and grow the stock price at a modest 2% per year.
The results are obvious.
Commodities can be part of a diversified portfolio. Traditional thinking is that they keep pace with inflation. I use a combination of TIPS and commodities for diversification into other asset classes that should have little correlation with the indices. The demand for commodities is growing exponentially in China. So much so that China has a strategic pork reserve. We have oil reserves, they have pork.
In fact, if I could invest in farmland right now I think its one of the better most simple investments out there.
This post was edited on 5/17 at 12:34 pm
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