Jonathan’s Story: Portfolio

I HAVE ROUGHLY 60% of my portfolio in stocks and 40% in bonds, savings accounts and other interest-generating investments. This seems like a reasonable amount of risk for a semi-retired 55-year-old to take, though I would likely boost the stocks to 70% and perhaps more if we saw a large market decline.

The bulk of my bond portfolio is split between short-term corporate bond funds and inflation-indexed bond funds. I suspect interest rates will head higher from today’s modest levels and, as a rule, I would rather play it safe with bonds and take risk with my stocks. In calculating my allocation to bonds, I also include the private mortgage I wrote for my daughter. You can learn more about that in the chapter devoted to borrowing.

What about stocks? I have almost everything in index funds. My written portfolio targets call for 60% in U.S. stocks and 40% in foreign stocks, though lately it’s been more like 50%-50%. The U.S. portion is split evenly between a total stock market index fund, which gives me broad market exposure, and index funds that focus on large-company and small-company value stocks. In addition, I own an index fund that buys U.S. real estate investment trusts, though I hold less than my target weighting, because I consider U.S. REITs to be overvalued.

Meanwhile, for foreign exposure, I own index funds focused on developed foreign markets, international value stocks, international small-company stocks and emerging markets. I also have smaller positions in funds that own foreign REITs and gold stocks. Foreign stocks strike me as better value than U.S. shares, so I’m currently overweighted in foreign stocks, especially emerging markets, and underweighted in U.S. shares, relative to my written portfolio targets.

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