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Author: frankwomble One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: IRA Date: 9/29/2003 4:06 PM
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In the long run, you would be well-served by diversifying with a total stock market (Russell 3000 is close enough) and total bond market indexes. You also spend more time enjoying life and less time worrying about your investments.

I think bond indexing belongs in every portfolio, to add diversification and reduce volatility. Best example of this need is the recent three straight years (1999-2001) of losses in the stock market, and a bull market for bonds. What will happen tomorrow? Who knows? A diversified portfolio is your best protection against the unknown.

When you're young (like you) a 75-25 mix of stocks to bonds is aggressive enough. At middle age, a 60-40 mix (the traditional pension fund mix) is more conservative. Five to eight years before retirement, a 50-50 mix is more conservative. In retirement, a 40-60 to 25-75 mix plus a heathly dose of fixed income investments is more advisable, but always retaining some stock-based investments for growth. You may live a LONG time.

Chasing 'hot sectors' is a high risk endeavor and will result in losses for most investors.


P.S. Read William Bernstein's book, "The Intelligent Asset Allocator." Also, take a look at Scott Burns' column in the Dallas Morning News on Couch Potato Investing.
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