This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Retirement Portfolio to Defy the Doomsayers

NEW YORK ( TheStreet) -- In a recent post on my blog I set out to try to debunk the depressing thinking that everyone's retirement plan is doomed to fail.

In my post I wrote the following, hoping to encourage people to come back to the markets and investing:

"People willing and able to spend the time (and save some money) can build a portfolio of a few dividend stocks, a couple of country funds and a broad index fund, then pay some attention to what is going on in the world and their portfolios and probably come out at least OK (no guarantees)."

The focus of such a simple portfolio is not beating the market over some period but instead meeting the humble objective of having enough money when you need it. This is the real financial goal of most people, even if they have never expressed it that way.

In choosing a broad-based index fund, it might seem logical to use a global fund like the iShares MSCI All Country World Index Fund (ACWI), but that would be a mistake.

ACWI has lagged the S&P 500 by 12 percentage points over the last year due to its exposure to Japan and the eurozone countries.

Anyone who believes Japan and Europe will continue to struggle relative to the U.S. would be better off using a broad-based, domestic ETF in concert with a couple of carefully selected country funds.

No fund comes without risks, but for a broad fund, I would suggest the PowerShares S&P 500 Low Volatility Portfolio (SPLV), which owns the 100 least volatile stocks in the S&P 500.

SPLV should provide a smoother ride over the course of the entire stock market cycle, which can reduce the chances of panic selling after a large decline in the market.

This fund is heaviest in utilities at 31% of the fund, which makes rising interest rates the biggest threat to the fund. Typically, rising rates are bad for utilities as money flows from this sector to bonds.

The Federal Reserve has told us we are at least a couple of years from rates going up, but when rates do go up, this fund will lag. This is why that excerpt from my blog advises investors to pay some attention to what is going on in the world and how it might affect their portfolios.

When choosing country funds remember to avoid countries that seem to be in terrible fiscal shape, such as Japan and the troubled members of the eurozone.

This portfolio is not really for people who manage their investments intensively. Thus, there won't be the same reward for choosing a country fund that one might get from choosing a stock well. But choosing a country fund requires less time than making a good stock pick. It also entails less risk.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ACWI $62.74 -0.40%
ENOR $25.54 -1.24%
AUSE $55.24 -0.11%
SPLV $37.70 -0.11%
ECH $42.51 -0.68%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs