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Where Will You Be When The Party's Over?

Therefore, I’m largely (70 percent) in fixed-income investments at this point, with 6 percent in cash, 4 percent in gold and 20 percent in equities.

If you want to roughly replicate this allocation, here’s an easy way to do it using mostly funds:

For the fixed-income portion, limit the maturities. If you don’t, you could get caught in a bond fund that loses substantial value when interest rates rise. Put 50% in the Vanguard Short-Term Investment-Grade Bond Fund (VFSTX) or Vanguard’s Short-Term Tax Exempt Bond Fund (VWSTX).  Use the tax-exempt funds outside of an IRA or other tax-deferred account.

Having significantly protected half of your money, you can reach for a bit more yield with the other 20 percent of your fixed-income sector. You could put a portion in the Vanguard Limited-Term Tax-Exempt Fund (VMLTX). For more yield, invest in Mr. Gundlach’s DoubleLine Total Return Bond Fund (DLTNX), which yields over 5% (as of 4/5/13) and has an average maturity of 3.67 years and an average duration of 2.23 years. That’s a healthy yield with modest risk metrics, but its best advantage is the fellow by whom it’s managed.

You could also diversify within your fixed-income assets percent by investing in Vanguard’s GNMA bond fund (VFIIX), which yields 2%. Or you could allocate a portion to the Stable High Yield model that I manage at Covestor. Through April 4, it has returned 12.7% over the past 12 months.

For the stock portion (20%), you can stick it all in the SPDR S&P 500 ETF (SPY). That way you’ll participate in any interim boosts from the stock market. If you do want to include an individual stock or two, pick among good dividend stalwarts like Altria (MO), Kinder Morgan (KMP), Plains All American (PAA), Verizon (VZ) and AT&T (T).

Now, there’s at least one well-respected voice out there who is forecasting U.S. deflation, but most Fed policy dissidents believe inflation is the higher probability. We’ll take their side by allocating 4 percent to the SPDR Gold Shares (GLD). Some pundits think gold has had its day and that silver is the better play, so the iShares Silver ETF (SLV) is another option.

The remaining 6 percent cash stash is for particular opportunities that you might come upon as you leave the party. Sleep well.

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