I have PAUIX as about 5% of the portfolio. There are no hard fast rules re allocating these type of tactical funds. About 2 - 3 years ago Rob Arnott who manages PAUDX/PAUIX said he had all of his retirement funds in the fund, over $1m at that time.

I am in retirement and have about 3% each in PAUDX and MFLDX. They are not core holdings.

For those of you with PAUDX or similar flexible/hedged holdings, how much do you allocate to these funds vs. a traditional stock/bond portfolio? As a person approaches retirement, would you increase or decrease your exposure to these funds, or maintain them in a small supporting role?

Hi Kenster, and thank you for the article link.
Aside from the investing markets in general and to their technicals; including the political ramifications of inaction in some developed countries are the investment areas that will be affected by the age groups, and in particular, at least for this country and the developed countries is the boomer group.
Part of the fuel for positive investment returns over the past 30 years (in the U.S.) was from the large middle class made up of boomers (our house, too). The investment table is already partially turned from the "in crowd" (investing monies) to the "out crowd" (drawdowns for retirement).
This full event will continue to unwind; and especially for some who will or have found they may need more money in retirement than expected.
This area and the ultimate affect upon investments for all is a known circumstance; and I am not obvisously making a new and grand discovery; but reiterating the thought.
Yes, there will remain investment areas that will provide decent returns. However, I do believe this will require much more effort going forward.
The younger investors too, will have to attempt to continously monitor what we (this house) older folks are doing with our lives and monies.
I constantly query those in their 60's-80's as to what may cause or has caused the method or plan they had in place regarding their spending habits. While my sampling is only MI and no more than 30 folks; beginning in 2011, 10,000 boomers retire every day of the week for the next 19 years. Obviously, what these folks do with their retirement money will have an affect upon various sectors of the economy.
From Pew Research: " 10,000 - Baby Boomers Retire
As the year 2011 began on Jan. 1, the oldest members of the Baby Boom generation celebrated their 65th birthday. In fact, on that day, today, and for every day for the next 19 years, 10,000 baby boomers will reach age 65. The aging of this huge cohort of Americans (26% of the total U.S. population are Baby Boomers) will dramatically change the composition of the country. Currently, just 13% of Americans are ages 65 and older. By 2030, when all members of the Baby Boom generation have reached that age, fully 18% of the nation will be at least that age, according to Pew Research Center population projections."
Take care,
Catch

Reply to @BobC: Thanks Bob. I very much respect your comments. My income side right now consists of an index fund that mimics the Barclays U.S. Aggregate Bond Index, plus managed funds MWTRX, LSBDX and FGBRX. I also have in this bucket RPSIX, which I know at this point has ~14% income oriented equities. All the managed funds have allocation risk, but pretty good management behind them.
Your comments on balanced returns is interesting and believable, but somewhat depressing. Five years ago, I can remember inputting 8% return into those retirement calculators. Recently as I get closer to retirement, likely by my employers call, I've been using 6% as a factor. Your 4-5% is probably a better factor to use in planning, just to be safe rather than sorry.
Thanks for the input.

Reply to @MikeM: Mike, I agree that you re-think your long-term expectations for both bonds and stocks. We tell our clients to expect 2-4% from bonds over the next 10 years, and 8-10% for stocks, with an average 60stock/40bond return of around 5%. This could very well be too low, but when we use 4-5% in our retirement income projections, we would rather be using conservative assumptions. And if you consider that we have been in a 30-year bull market, declining interest rate environment for bonds, it seems only logical to assume returns will be lower going forward. So your lower-expectation comments are right on. But 2-4% seems pretty good, knowing that some funds will do much better, while others will struggle to break even. And, yes, I agree that some risk in bonds is worth taking. But that is not the case for every investor. Many bond investors would prefer to have NO risk to principle, but they don't think about interest rate risk and inflation risk and how they can negatively beat up their bond portfolio. But I'm with you...give me Fuss/Gaffney and Hasenstab just about any day.

Howdy Mike,
You noted: " As part of a balanced portfolio using bonds to lower volatility, don't you have an expectation for returns?"
I believe to understand that her statement leans towards current protection during erratic equity markets. One would suppose to the point, that even if yields in IG bonds don't move around too much, that the monies would be fairly liquid and at least retain value. If she is more of a "bond" person, she may be seeing more rough equity waters ahead.
I will note, not that others are not unaware of or have not seen this during conversations among those on tv and in article writes; that, there are those in the equity and the bond worlds of investments that do not cross the lines of what they see and find to be correct going forward. Mostly by chance, I have heard the answer to the question; "Do you invest in "x" at all?" Reply, "No, I don't invest in equities or bonds."; depending on the person's leanings for investments. Both worlds will product excellent profits if the person is skilled and especially if they use the other tools available to "adjust" their holdings.
Our house had been a 90% equity house from 1979, until June of 2008. The transistion among the equity bumps here and there (March 2009-today) to bonds has been an interesting journey. The transistion may have happen to some extent; as retirement is just around the corner, but avoiding most of the market melt and moving to bonds opened the door much sooner.
At the very least, we have become more diversified in our knowledge and thinking about investments.
The big work is picking apart the numerous sectors that are the equity and bond worlds; and finding the comfort zone of blend for the risk and reward.
Note: our cash is in bond funds, versus MM accts. And we do expect to earn a few bucks from any of our bond fund holdings.
Take care of you and yours,
Catch

http://finance.fortune.cnn.com/2012/06/14/retirement-guide-herro-europe/?iid=SF_F_Lead
The vaunted international stock picker David Herro is betting big on banks in France, Spain, and Italy. But he doesn't call himself a risk-taker.
FORTUNE -- David Herro seems awfully relaxed for a man who has more than $1 billion invested in European banks. It's a sunny morning in late May, and I'm sitting across from the boyish 51-year-old fund manager in his downtown Chicago office. He's giving me his full attention, but I can't stop glancing at the headlines blinking on the Bloomberg terminal behind him. The euro is about to hit a two-year low. Greece is on the brink of disaster. Spain's real estate market is in shambles, and Italian sovereign debt is as fragile as stained glass. The global economy is roiling, and Herro is positively beatific.
"Eventually they're going to get these problems solved," he says. "If you look at the economic history of the world, problems come and problems go. There are problems, and they do have to be dealt with. And our view is that all these problems are manageable."

Hi, bee.
Walked through it. The software concluded that both the hypothetical investor (Robin) that Junior and Johanna used in this month's "Best of" column and I are in deep doo-doo. Robin needs to save $1100/month and I need to park away $2600/month. It might be right, but it's virtually alone in that judgment.
I'll note that the site doesn't account for Social Security benefits (at least not in any visible locale) and its rate of return assumptions ("we use 5th percentile value of annualized returns of the S&P 500 over 30 year periods" - basically, it assumes a permanent bear market) strike me as untenable.
I'll flag this site for J & J to look at as part of their impending update of the retirement calculators piece.
For what it's worth,
David

From WSJ Article:
"FutureAdvisor, which has no ads, bills itself as a free alternative to paying a lot for financial advice from professionals, who often charge a 1% annual fee or work on commission. Many big investment firms offer retirement-savings services, but these generally don't offer step-by-step advice for an investor's complete portfolio."
http://online.wsj.com/article/SB10001424052702303506404577448503218010424.html?mod=e2tw
The Website:
https://www.futureadvisor.com/
Anyone familiar with this site?

Interesting article.
1. At least he throws great parties. I've never been a shareholder, but shareholders can go to the annual meeting, which has interviews with the portfolio managers, interviews with CEOs and performances from the likes of Sting and I think Jerry Seinfeld one year.
2. I thought Baron Partners could short (although like CGM Focus, rarely did.) Guess not.
3. A whole lot about going after more money, not a lot (really nothing, actually) about things that benefit shareholders - none of it seems to understand the current environment. If you're going to expand in this time period and try to pull in more assets, "Baron Balanced" has a nice ring to it. Obviously low-risk is not what Baron is about, but if it's about pulling in new money... Pimco's new funds haven't been all that outstanding, but I think at least they show an understanding of what people are looking for.
Um, speaking of funds that might be of interest given the current environment, whatever happened to Baron Retirement Income? It's not even listed on the Baron website or Morningstar.
4. "Could Baron skip the frills and simply pass the $25 million difference along to shareholders in the form of lower fees? Baron contends that most people don't care about the price tag. "We are not trying to be Wal-Mart," he says. "If people want low fees, they can go to Vanguard."" Lol. People don't care about fees? Apparently he's never read MFO. The Wal-Mart comment also shows, much like a fair amount of the rest of the article, Baron doesn't get why 18% of the company's assets have left.
5. He's a permabull. He admits errors in 2008, but the next "crisis" will likely be no different for Baron funds.
Bonus: "lives on an East Hampton property that cost nine figures in 2007. Reports at the time said he bought it for $103 million, but he's quick to correct a reporter: It was actually $132 million."
Nice timing (again, permabull.) Although he probably doesn't care.

Sunday morning coffee break,
What's your trigger point(s)?
--- Are you using fundamental or techinical analyis, or a combination? Are the fundamentals without merit; at least at a company level, and that the global (central banks and debt) the real place to view what may be fundamental to your investments? A few have noted here, that their market trigger points came to view in the month of April; and a review of charts indicates a most correct call. Congratulations.
How are you guaging the markets?
--- Take no prisoners. While past sideways markets may have provided some shelter in domestic equity havens of broad healthcare, consumer staples and utility area investments; a take no prisoners equity market puke doesn't really care about these sectors, eh?
What's your breaking point?
--- How far does one ride a sector or broad market move? This question is not just inclinced to a sell function; but also to a buy function, any given sectors.
D-I-Y long/short fund house.
--- Without actually investing in an active long/short fund; many investors are operating their own long/short portfolio based upon their mix. Not unlike a long/short fund; the balance may tilt too far one way or the other. L/S funds do have the obvious advantage of using all of the tools (put/call options and the full tool box) to modify in a short time period to where they think a market sector(s) may be headed. For individuals, a most simple plan of a 50/50 split between VTI and BND (or one's favorites in these areas) could do the trick.
Our current portfolio has become ballasted more and more towards IG bonds; not that we have not had some of this ballast in place for the past 3 years. Whether or not anyone who reviews the Funds Boat is in agreement to our portfolio mix is not the point of the posting; only to the fact of another portfolio view for consideration, and that we place our monies where our mouth is.....
As is always noted (especially for new visitors to this site); is that our position is directed towards capital preservation first, and to hopefully trickle growth into the mix; regardless of how or where from, the growth arrives. However, captial preservation must also be a priority for the beginner, too; and regardless of the age for those who have been investing for any number of years and find retirement to be a few decades away. The value of capital preservation is the ability to compound the positive, regardless of how small the return; into continued growth going forward.
What is your plan with your portfolio during this twitchy investing period? Is this period just a re-do of 2010 and 2011, or otherwise? Or do you feel this is just a blip to ride out and the problems will be resolved in a timely manner to your satisfaction and have no long term impact upon your portfolio?
Okay, out of coffee.
A few simplified questions posted for this house and yours; but requiring more complex answers. Not really a totally fair mix between a simple question requiring a complex answer; but some of the questions we all attempt to answer for ourselves. I don't recall any quotes about investing being a simple task.
Be careful out there in investment land and take care of you and yours.
Catch

"This month we begin by renewing the 2009 profile of a distinguished fund, Wasatch Long/ Short (FMLSX) and bringing a really promising newcomer, Aston / River Road Long- Short (ARLSX) onto your radar.
Our plans for the months ahead include profiles of Aston/MD Sass Enhanced Equity (AMBEX), RiverPark Long/Short Opportunity (RLSFX), RiverPark/Gargoyle Hedged Value (RGHVX), James Long-Short (JAZZX), and Paladin Long Short (PALFX). If we’ve missed someone that you think of a crazy-great, drop me a line. I’m open to new ideas."
There have been few successes in the long-short field in part because of the inflexibility of the funds - these were largely presented as "hedge funds for the masses", but in many cases are not flexible enough to be really functional in this market. They're just not hedge funds and if the funds are not "fully functional" in a way that can pull of the strategy, they disappoint . See the Rydex Managed Futures fund, which was "ahead of its time" as the first Managed Futures fund, but after it worked in 2008 when everything went in one direction, it has seemed broken ever since because of the fact that the long-short fund only repositions once a month (and I believe is sector specific - if it's short ag, it's short ag across the board rather than specific commodities.) Managed futures as a strategy has not been outstanding in the mutual fund space over the last few years, but a number of large managed futures hedge funds that are vastly more flexible have done fine. However, something that updates its positions once a month in this market is going to be continually off unless you get one long, continuous move either way.
Additionally, many long-short funds often seem to take the long-short mentality too literally - those funds that can dial up and down risk with much greater flexibility (Marketfield, the Robeco fund) are the few that have held up better than the rest. Those who seem to continually have to be short with a good deal of the portfolio have not. Those who have tried to discuss fundamentals in a time of the easiest monetary policy in history (Hussman) have not. Nakoma, well...
As for the James fund, didn't they have a Market Neutral fund that imploded not that long ago? That fund was down 28% between 11/08 and when it folded in June of last year.
Look at what Leuthold Hedged equity turned into (or not.), as well. As for Leuthold....
"I’ve been wondering, lately, whether there are better choices than Leuthold Global (GLBLX) for part of my non-retirement portfolio."
Yes, yes there is. The Leuthold funds continue to be disappointing and I think it became clear that the hundreds of indicators that Leuthold was using were no longer all that functional in a market like this as maybe they used to be.
I mean, from an article on hedge funds and being in a market where one "has to change algorithms":
http://www.reuters.com/article/2012/05/21/us-trading-blackbox-idUSBRE84K07320120521
"NEW ALGORITHMS
In the middle of a trading floor overlooking the Thames, a huge screen flashes with the deals - everything from interest rate futures to oil contracts - made by AHL's black-box computer.
The firm has recently had a rough ride: its portfolio fell almost 17 percent in 2009 and lost 6.8 percent last year when the fund's assets shrank 11 percent to $21 billion, dragging the share price of its parent, Man Group.
"We've learned our lessons," says boss Tim Wong. The fund is now keenly aware of the need to pay attention to what its rivals may be doing, he says.
But AHL isn't out to match Winton's ancient data - its chief scientist Anthony Ledford argues that modern markets behave very differently than they did 50 or 100 years ago. ************* Winton sends researchers to libraries and archives across the world to find numbers held in books and on microfilms. It has found barley and sesame prices from ancient Babylon, and English wheat prices going back to 1209. It now employs more than 90 researchers, including extragalactic astrophysicists, computer scientists and climatologists. The company hired a meteorologist who had researched the "El Nino" phenomenon.************** The physics graduate - Winton wants to keep his name secret for fear a rival might poach him - works in London correlating weather data to crops such as corn, wheat and soybeans. That data can be used to forecast how prices might fluctuate with the weather.
Instead, it is sharpening up its processes. AHL has cut back its short-term algorithms, and is developing codes to profit from different market patterns away from trend-following - for example, betting on the fact that markets tend to iron out short-term anomalies over time, or revert to the mean.
With volatility so high now, it is also developing new algorithms that try to predict, and trade on, the changing volatility of different assets.
Its approach gets support from some investors.
"The old CTAs are relying too much on the past," said Monty Agarwal, an author and founding partner of Managed Futures Fund, which invests in both its own and external CTAs. "The new strategies that we see thriving are mean reversion, which is trend anticipation, and pattern recognition - artificial intelligence."
The funds know they need something new to generate 'alpha', or outperform the market. AHL's Ledford isn't sure whether short-term codes will ever work again. "It's either taken an extremely long time for the alpha to come back from those frequencies or it's not coming back," he said. "And I still don't know the answer to that."
---
Or, as Lord Rothschild (or "Lord Vader", perhaps) simply said a couple of days ago, "Unless one has a long horizon, investment success in
public markets has become a game of timing rather
than fundamentals."
You have an investment market where people have to research grain prices from ancient Babylon in order to try and get that extra leg up over their computer-driven competition. No comment really necessary.
Overall, another really terrific article this month, and keep up the wonderful work with MFO.

Hi, guys.
Hope you like it. Four fund profiles - Aston/River Road Long Short and Wasatch Long Short (an update) plus Huber Small Cap Value (Lipper's top SCV fund for the past three years) and Osterweis Strategic Investment (another update).
There are also several warnings about bad data at Morningstar - or, at least, stuff that's substantially inconsistent from one portion of the site to the next, a note about FBR's decision to try to sell their fund family (perhaps they regret chasing Chuck Akre and his billion in assets away?) and other bad moves by fund directors.
"Best of" looks, a bit, at retirement income calculators. I'm likely to follow up on the subject myself in July.
And I've tried reorganizing the "briefly noted" section and the style of the updated profiles, to make both a bit more usable. Let me know what you think.
And have a great weekend.
As ever,
David

Hi tip,
Most of our assets are held at Wellstrade (WT) because of their 100 free trades/year for qualifying accounts. You may link a qualifying retirement account with a non-qualifying taxable account, so that you get 100 free trades for each account. And I have been able to link my qualifying account with the non-qualifying accounts of my 7 children, so that they each may have 100 free trades/year. Also, there is no WT short-term trading fee other than those required by mutual funds. And they do reinvest dividends for stocks, OEFs, and CEFs on request.
However, since opening our accounts, Wellstrade has provided consistently very poor service. If you want them to carry a new mutual fund, forget about it. They will if they want to and definitely NOT because you want them to. With transfers in and out of WT, you need to fax the required documents, and then call them to make certain that everything is in order. If something is not right with your paperwork, they will not call or contact you -- at least that is my experience. I have become accustomed to their poor customer service, which is at least consistent. I guess that is a positive if you squint your eyes.
We also have smaller accounts at Fidelity, Scottrade, TOS/TDAmeritrade, and Firstrade for access to specific attractive mutual funds which are not available at WT. Fidelity has the absolute best service in the business IMO, but they also have the almost the highest costs. The customer service and costs at the other three brokerages are excellent. Please note that we had a Thinkorswim (TOS) account before they were gobbled up by TDAmeritrade, so we are grandfathered into the very reasonable TOS fee schedule: $15 for sale or purchase of non-NTF funds, and no short-term trading fees other than those specified by the mutual funds.
I really wish I could consolidate all of our assets in one brokerage, but so far that's a no-go.
Kevin

In the domestic value space, I am using FNSAX, which is more of a multi-cap value fund. Another young fund in this space to consider would be GOODX.
In the domestic MC space (all styles), funds that look attractive include UMBMX, WPFIX ($2K minimum in Scottrade retirement accounts per site), and DEFIX, in that order.
Kevin

Guys - don't get me wrong, this isn't a call to overweight Stocks right now or immediately.
Yes, computers are investing for the next 30 nanoseconds but the point is to try to hold your stock/bond balance within reasonable range. If you're say an average 39 year old investor then maybe 80% stocks is a bit too aggressive and also 80% bonds could be a bit too conservative. If you've normally been comfortable the past few years with a 60/40 stock/bond allocation but recently have gone to a bit more conservative stance to say 50/50 --- then that's perfectly fine especially considering this investor is adding new money periodically in their 401k.
In early 2009 - I have seen investors including acquaintences I've met at parties who dumped ALL of their equities at that time.
My own take-away I have from the article is not to replace drastic amounts of bonds with equities but to be careful about overdoing the fear factor and not investing in stocks at all or barely doing so out of fear. Again, I ramped up my investing in equities actually during the aftermath of the dotcom crash and I came away beautifully for it. What's the big deal as the stock market goes up and down while you're adding say $500 or $1000 a month to your Retirement fund.
The reason why HP, Nokia, Motorola, Dell and RIMM stocks have been down, down, down and McDonalds, Apple, Visa and Mastercard stocks have been up and up has all been about their business and not because of fast-trading computers. Visa and Mastercard were a good buy on the dips after they debuted --- especially if your investment horizon is longer than 30-nanoseconds or 30-seconds or 30-days.
The short-term stock movement is based on a voting machine but in the long-term it's based on a weighing machine.
Nothing is wrong with being a bit more defensive these days especially if the macro environments worry you and would cause some sleepless nights but the perspective offered in the article is dead-on as least for me....not for overweighting nor replacing bonds with stocks but for understanding why I should hold on and continue investing new money in a balanced portion of equities in my portfolio. Like I said before --- adding new money periodically bit by bit, month by month as the markets went lower and lower was an awesome time for me.
We're getting closer and closer to juicier and juicer valuations.

also a couple of reads about retirement/long term investings
http://online.barrons.com/article/SB50001424052748703438504577042394189481000.html#printMode
http://seekingalpha.com/article/309386-time-to-throw-away-the-4-withdrawal-rule-for-retirement
http://seekingalpha.com/article/309115-retirement-scenarios-the-good-the-bad-and-the-ugly
http://www.forbes.com/sites/rickferri/2011/11/21/withdrawal-rates-drop-as-fees-rise/
http://www.burnsidenews.com/Opinion/Columns/2011-11-14/article-2804370/The-new-retirement-and-effects-of-market-risk/1
http://www.prnewswire.com/news-releases/americans-in-the-dark-about-the-real-cost-of-retirement-131508253.html
http://seekingalpha.com/article/298138-rewriting-the-4-rule
also rono's previous retirement commentary, a must read imho
rono - retirements
Think of your retirement like a stool with legs. We all know that if your stool only has one leg, it won’t be very sturdy. Even if it has two legs, it will likely tip over. Once we get to three legs, it’ll stand on its own. With four legs, it becomes even sturdier. In addition, you want your legs to be strong.
With your retirement, the objective is to have as many legs under your own retirement stool as you can. More is better. You always want more legs. In this way, even if one leg falters or is cut off, you have other legs to support your stool. Five is better than four, six is better than five.
Examples of legs are numerous, but we can start with Social Security. Add in your Pension. How about a saving account? The equity in your house is a good one. You want to include deferred compensation and an IRA. Another leg could be an outside business – you could be an EBAY dealer, or a landlord, or have a corner store. What about having children that have gotten a good education (largely with you help, I should add). You might have a collection of widgets that have value. These ALL can become legs under your retirement stool. Which do you have and how strong are they?
SOCIAL SECURITY. Regardless of how secure you may, or may not, think the system is, in all likelihood it will be around to a greater or lesser degree. Sure, the age at which you can start drawing may increase and even benefits may be reduced. However, it remains such a key component of our society, that to some degree it will be one of your legs.
PENSION. Whether you’re going to receive a Defined Benefits (traditional) pension, or a Defined Contributions (401K) type pension, this is also another key leg under your stool. A traditional pension is nice because supposedly it’s a guaranteed income for the remainder or your life [note: this is no longer such a guarantee as in the past]. Sometimes you even have the choice of a “cash out” option where you can roll the monies into a Rollover IRA and thereafter have control over it. With a Defined Contribution (401K) pension, you also have some benefit in that it’s portable. If you decide to change jobs, you can ‘take it with you’. Normally, this is also through the process of moving it into a Rollover IRA.
SAVINGS. Hopefully, we all have some savings if nothing other than an Emergency Fund. An Emergency Fund is where you start and is normally six months worth of expenses (bills). Once this fund is established, additional savings can be invested or simply left in the bank. Either way, this money also represents another leg.
DEFERRED COMPENSATION. Many employers offer some sort of deferred compensation in addition to the 401(k), in which you have an option of also investing. Depending upon the particular plan, the limits may or may not be similar to those of a 401. You might have similar or different investment options and you also might have different withdrawal rules. However, it can become another Leg under your retirement stool.
IRA (TRADITIONAL OR ROTH). The Roth IRA is one of the nicest gifts ever made to us by the federal government. With limits, you can contribute up to a certain amount each with after-tax dollars and later withdraw everything TAX EXEMPT. There are some minor restrictions on withdrawal of the gains (not the principal), but these are minor and end at 59 ½ . After that you can take it out however you wish without worries about the taxes. This is very neat.
With the traditional IRA, if you have a lower income, you can contribute with after tax monies (the credit comes when you file your taxes). This money grows tax deferred but your withdrawals are subject to tax as income. There are even situations where it may be wise to contribute to a traditional IRA when you don’t qualify for the tax break. This is because you’ve contributed After tax money and therefore only the gain is taxable at a later date – not the principal. You would want to weigh the tax implications both now and in the future to go this route, but it should be considered in some situations.
A further note about these tax exempt or deferred IRS type of retirements savings plans (401, 403, 457, traditional IRA and Roth IRA) is that they often have drastically different withdrawal rules and tax implications. This means they provide a great deal of flexibility in how your use them for retirement . . . and flexibility is good.
HOME EQUITY. Buy a home. Period. It beats renting as you’re paying into your OWN equity, rather than the landlord’s. Over time this equity will increase and become available, should you need it, in retirement. There is even now such a thing as a reverse mortgage. This is where, in retirement, you sell your home to the bank, and continue to live in it until you die, but they pay YOU a monthly mortgage payment. However, this only works if you’ve either paid it off, or most of it, because in effect, you’re borrowing on your equity. Home equity is a great and crucial leg under your retirement stool.
OUTSIDE INCOME. Start another business on the side. Sell stuff on EBay. Become a landlord and rent out houses. With any of these, you’re establishing a second stream of income and another leg under you stool.
CHILDREN. You’ve heard the expression, “my son (daughter) - the doctor”. Well, don’t sneeze. Having kids and helping them through school so they can get good paying jobs is a form of security in your old age that can be very important. How many know of someone who had a parent or other relative move in with them? Whether you need or want to use it, it can be another leg.
In summary, you want to take an inventory of the number of legs you have under your retirement stool and how strong each of them is. Can you add another leg or two between now and when you retire? Can you strengthen any of the weaker legs you presently have?
The bottom line is that your retirement is only as secure and sturdy as you make it and having a variety of strong legs under your retirement stool, provide a diversity that can insure you against any one or more legs, getting chopped off or eliminated. Or think of it as diversifying your retirement. If diversification is good for your portfolio . . . why is it not good for your retirement?

PART II..............................
>>> Risk exists period. Pick whatever sector you choose and the risk is there. The writer notes: "Hopefully, it is more out of ignorance of the true facts than it is by bad intentions." We do our best here to understand the variables and machinations in place. We readers; at least as to what I read from this writer, does not explain or express what the "true facts" may be to rest this article upon. It is apparent from my personal view, that what the writer understands or knows to be "true facts" are not always from the same perspective or knowledge base.
As I have discussed in this article and many previous articles, I believe investors should behave according to the advice of legendary hockey star Wayne Gretzky who taught us "I skate to where the puck is going to be, not where it has been." In that vein, I believe that tomorrow successful investors will follow Wayne Gretzky's lead.
>>> This is a correct statement and example. While the writer uses this fine quote, I feel it partially dissolves his giving credible meaning to his thoughts regarding the "old" data. His expression of the value of the "old" data is "where the puck has been".
For the past several decades bonds have been a great refuge of safety and attractive return, especially for the investor desirous of income. But I believe a careful examination of the 110-year-old 10-year Treasury bond history presented in this article indicates that that is about to change. Conversely, I believe the future for US based dividend paying equities is quite bright. At least that is where I recommend skating in today's investment environment."
>>> Again.........His expression of the value of the "old" data is "where the puck has been". Equities will likely be bright again; with some sectors shining brighter than others. Our challenge is to discover the "whens" with any sector or type of investment.
I am not so sure that the past several decades have been the place for investors attempting to discover income. The majority of baby boomers were not invested directly into bonds. The motivating factor as to large bond positions have been/were held by many pensions funds, in my opinion.
As this house is of the "boomers", I will mention again; as been stated before also at FundAlarm; I still feel many economists and related writers and advisors are still having a problem coming to grips with the social/economic changes that have taken place.
I still point a finger at some today on the tube who I feel have not made the transisition to this new world of investments. I make this statement from the position of our house having been 90% equity investors since 1978. Today, we are not at this time. This too, may change.
Finally, if we were 15-30 years younger, and knowing we would have continuing cash flow into this house from employment vs pending retirement; we would be slinging some money at the etf market place and playing with some of our monies in this space, which is the "new" area of what was the options and futures markets of 20 years ago.
Kenster, thank you again for this part article.
Best to all in this turbulent investing period.
Regards,
Catch

"To summarize, the only rational reason that people are eschewing stocks in favor of bonds is fear. "
Not entirely. I believe distrust is absolutely a primary reason - many people's faith and trust in the financial system is broken and that's simply going to take time. People who are near retirement age and just went through the worst financial crisis in history are - in many instances - not going to take major risks again.
I mean, look at mutual fund flows - three years of near-constant outflows from equity funds (mostly domestic, which I find fascinating) and into bonds, which shows no signs of stopping. That - to me - looks like an orderly flow of people out.
Are bonds the right choice? Fundamentally no, but that's where people are - they don't want to take the risk of equities and when you take away any sort of interest on checking or CDs, people flock to all sorts of bonds and you get an angry mob of seniors who are upset they aren't getting much interest on their fixed income and who get 0.0000000000001% on their CDs.
Additionally, as for the market, Flack said it well in another thread: "I know that a few of you will say, “But that didn’t happen in 1952 or 1968 or whatever year.
I don’t know how many times I’ve said this but this is not your father’s stock market.
You father wasn’t matched up against computerized trading that doesn’t give a rat’s ass
about fundamentals.
This means that you should evaluate the market conditions
as they are currently and forget about what the market was like
some 30, 40, and 50+ years ago."
...and I think a fair amount of retail investors are also starting to get that - that the balance of power has shifted even further out of their favor.