Retirement plan needs a bit more diversity
Q: Most of my 403(b) portfolio is in Fidelity large-cap funds, with about 15 percent in bond and money-market funds. The stock funds have performed poorly. Since I am 20 years away from retirement, should I do anything with those funds?
A: Consider reallocating your portfolio, both for purposes of defense, and to be ready for gains in the market when it comes back, says a Boston-based financial who asked that his name be withheld.
He believes that valuations remain historically high for many stocks, despite the recent downturn. He recommends shifting at least 30 percent of your portfolio into funds that use hedging strategies to provide defense and room for later growth. Check with your fund company to see which funds offer such strategies. Some of that 30 percent could go into an international fund using hedging, he says.
He would also boost your cash and bond position from 15 percent to 30 percent. Use short-term bond funds for the bond component. Of the remaining 40 percent, he would put half into a growth-and-income fund, rather than just large-cap funds. The other half should be "spread across the board." Diversifying should "let you sleep a lot better at night," he says.
Q: What advantages are there to using a financial adviser at a full-service investment house over a discount broker? How much service can you expect other than help in allocating your investments, plus monthly statements? Will a financial adviser discuss insurance or wills, or do I need a financial planner for that?
A.N., Hingham, Mass.
A: "At A.G. Edwards & Sons, and many other full-service investment companies, brokers and advisers are the same person these days," notes Margaret Welch, a spokeswoman for A.G. Edwards in St. Louis. Financial advisers provide a range of services, including helping a person set up investment goals, providing information, offering products, and offering help in buying or selling financial instruments.
At a discount broker, you often just get help executing purchases or sales, although you may also get some consultation.
At a full-service house, a financial consultant "is constantly there for you," says Ms. Welch. And yes, the consultants often can help you deal with estate planning and wills. At Edwards, for example, they will often provide advice, and then work with your lawyer or refer you to one for the actual drafting of documents.