Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to and post your comments below.



Getting into the Investment Mix

Karen Gibbs

Karen, what’s the best investment mix for me?  I’m a 62-year old single woman with a 401(k) and some personal savings.

- Courtney, Cecil County

CaluclatorCourtney, conventional wisdom used to be that your portfolio should consist of cash, bonds and stocks, with your stock percentage calculated by subtracting your age from 100.  In your case that would be 38% stocks with the rest of the portfolio divided between cash and bonds.

However, we’re living longer now and, to account for that, we need to invest in assets that will grow, not just protect our principal or generate income.  The new rule of thumb is to subtract your age from 110 or 120 to get to the percentage of stocks.  That would put your stock position to somewhere between 48% and 58%.
But there’s more to investing than return.  At this stage of the game, investors need to consider just how much risk they are willing to assume in exchange for return.  Will you be able to sleep at night with 48% or more of your retirement invested in stocks?

As you are pre-retirement age, the safety of your investments is of paramount concern.  With the volatile stock market and challenging environment for returns, investors are wary of the risks associated with the stock market.

Diversification is one way to reduce risk.  You can have a mix of domestic and international stocks; large cap and small cap stocks, growth stocks and value stocks. The premise is that not all stocks move in tandem, and that by having a mix you reduce the impact of adverse movements in one by offsetting movements in another.

My suggestion to you would be to talk with a certified financial planner.   They can take a look at your entire retirement picture, factoring in possible pension payouts, social security payments along with your retirement portfolio.  Monte Carlo simulations can predict how your portfolio will respond under different risk/reward scenarios.  Using that information, the financial planner can suggest to you a mix of assets that will help your achieve your investment goals while making sure you sleep at night.

When searching for a financial planner, ask how they calculate their compensation.  You want a fee-only financial planner.  Here’s a link to help you find a fee-based planner in your area:

The Maryland Office of the Attorney General’s office is charged with protecting consumers.  Here’s a link to a guide to help protect you from investment scams.

Good luck!  

- Karen

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