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What Your Retirement Portfolio Needs Now

Evolution in the global capital markets and in investment vehicles is changing how investors must construct their portfolios to get the greatest return for a successful retirement.

You need to examine the allocation of your retirement portfolio now, if you haven't already. Ensuring that you get the best return takes some rearranging from time to time, and you'll want to take advantage of investment products that are available now that can help maximize your efforts.

This past weekend, Barron's reiterated this thesis with a suggested portfolio put forth by Mohamed El-Erian from Pimco. Let's use this portfolio as a starting point for our discussion now on how to get the most return on your retirement portfolio. In case you missed it, here is what El-Erian suggested for allocations:

  • domestic equities: 15%
  • foreign developed equities: 15%
  • emerging-market equities: 12%
  • private equity
  • domestic bonds: 5%
  • foreign bonds: 9%
  • real estate: 6%
  • commodities: 11%
  • inflation protected bonds: 5%
  • infrastructure: 5%
  • special opportunities: 8%

One quick note: The percentages given in Barron's add up to only 98%. Obviously, anyone actually taking El-Erian's suggestions could allocate the 2% elsewhere, or hold it in cash or, keeping consistent with the diversification, foreign currency.

With El-Erian's suggestions, only about one-third would be in domestic equities, which would require a big shift in thinking for the typical U.S. based investor. What you may want to do here is simply capture the equities exposure and go along for the ride.

El-Erian obviously believes foreign and emerging equities will continue to outperform the domestic market. If he is correct, then just having the foreign exposure will add value for a U.S.-based investor. This line of thinking clearly makes sense as the U.S. stock market has endured an eight-year round trip to nowhere with no turnaround in sight.

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