I'm just curious if you have advice on the Plan3 SERS Retirement System? I would like to choose a Self-Directed Investment Program. They have a 3 preset portfolios to choose from called Horizon Funds. Short-Horison 29% Stock and 71% Bonds, Mid-Horizon 54% Stock and 46% Bonds, and Long-Horizon 80% Stock 20% Bonds. With the economy the way it is right now and stocks as well, what would be the rihgt and smart choice now? I don't mind investing aggresivly and would retire in 20 years. I would appreciate any suggestions!!
I'm just curious if you have advice on the Plan3 SERS Retirement System?I don't know the Washington State Retirement System, so my discussion will be generic without knowing any specifics other than what your message posted.I don't mind investing aggresivly and would retire in 20 years.Aggressive implies risk, which implies that your portfolio would experience volatility. Most investors like it when stock prices go up, but stock prices also go down. Generally, though, over the long run stocks would give the most growth. There is no guarantee that stocks would be the best for a specific 20-year period, but the odds are stacked strongly in favor of stocks. But that is true if you can weather the downs as well as the ups. If you can handle a 35% drop over a couple of years, I would be inclined to suggest the "Long-Horizon" portfolio. Knowing what I know now (instead of 20 years ago), I would probably want to go with this portfolio.If you will panic and shift your investments around because of a 35% drop over a couple of years, the "Mid-Horizon" portfolio may be more suitable, but you are likely to have lower returns after a couple of years, but maybe more than if you went with the "Long-Horizon" and then shifted your investments after the market had dropped. The "Mid-Horizon" portfolio, being 54% stocks, can indeed lose value, but it is unlikely to lose as much value as the "Long-Horizon" portfolio.With the economy the way it is right now and stocks as well, what would be the right and smart choice now?Where do you think the economy will be in 20 years? If you think the economy will grow in the next 20 years, it seems that now is a good opportunity to get on board. If, on the other hand, you think the economy over the next 20 years will remain the same or shrink, contrary to historic trends, one could argue for a bond-heavy portfolio.My money is on long-term economic growth. What we have experienced in the past two years is part of the normal economic cycle and I woudn't be at all surprised to see more cycles of growth and retreat, but overall I expect growth of the economy to be more than the retreats. The trick, of course, is to have a reasonable investment plan and not allow the emotions to get one greedy at peak stock prices or fearful at bottom stock prices--buying high and selling low won't help.I remember reading somewhere that something like 85% of the differences between the long-term returns in pension plans could be explained by their strict adherance to an asset allocation plan, and only 15% could be explained by specific investments and other factors. So if the portfolios available to you attempt to stick to the specified asset allocations, they will be doing the very thing that is likely to best for the long-term returns.Of course, no guarantees.
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