FRANKLY, I DIDN’T KNOW how wise or prudent our investments are, so I decided to take a closer look.
Turns out my wife and I are fairly well diversified, but is it the right mix? Our investment goals are preservation of capital, generating income and modest growth. To achieve these goals, we have a mix of money market funds, dividend-paying individual stocks, and bond and stock mutual funds—mostly stock-index funds. The stock funds include large-cap and small-cap, and a bit of international as well.
In our brokerage account, two utility stocks account for 40% of the total balance, stock mutual funds 13%, municipal bond funds 44% and money market funds 3%. Meanwhile, my rollover IRA—which is my old 401(k)—is invested 67% in stock mutual funds, 23% bond funds and 10% money market funds.
Overall, that means we’re 23% in individual stocks, 37% stock funds, 34% bond funds and 6% money market funds. Currently, all capital gains and income are reinvested. We can turn any and all of those automatic reinvestments on or off at any time. Dividends are paid quarterly, tax-free interest monthly and capital gains generally annually.
Clearly, we could have done better during the recent bull market—but the higher stock allocation would have meant we’d have done much worse in this year’s downturn. Based on our goals, I’ve been told that we should take a longer-term view and be more aggressive. Yeah, I’m not feeling aggressive.
Given that we live off my pension and our Social Security income, our primary goals are to leave a legacy for our children and to withdraw from investment earnings should we need additional income—or, if I die first, should my wife need additional survivor income.
Do we have the right mix for maximum return? Probably not. Do we have the right mix to meet our goals while minimizing stress? I think so. I hope so.