The bull market for equities continues to defy predictions of an impending correction. Most economists maintain that it’s not if a pullback will happen. It’s when. That being said, vigilance in this environment is critical, particularly in retirement.
Is It Time to Rebalance?
Since stocks bottomed out in 2009 after the financial crisis, we’ve seen them come roaring back at about five times the rate of the bond market. If you haven’t been rebalancing your asset allocation during this period you may have too much risk in your portfolio—and it not might be from stocks. For example, former CNNMoney “Ask the Expert” columnist and “Real Deal Retirement” editor Walter Updegrave recently wrote “someone who started with a 60% stocks to 40% bonds portfolio in March 2009 would have upwards of 80% of assets in stocks and just 20% in bonds today, assuming no rebalancing and reinvestment of all gains.”1
Growth and Protection
With interest rates destined to move up, the future of bond market returns doesn’t look rosy. U.S. Government bonds are often called “risk-free.” Technically, that refers to default risk. These investments are still subject to interest rate and inflation risk.
One solution being recommended more and more these days is using fixed indexed annuities (FIAs) to manage risk in a portfolio. Recent innovations in these products have made them a very attractive bond or CD alternative for many reasons. For instance, they offer principal protection guaranteed by the financial strength of the issuing insurance carrier, and some FIAs offer more attractive returns.
This is a great time to reevaluate your risk allocation. Please contact us if you need help. Estate Planning Solutions in Glendale, Arizona can be reached at (623) 537-3657.