NEW YORK ( TheStreet) -- Last week I wrote about how investors need to rethink how they track investment performance, with the focus more on cash flow of investments verses total account value.I received lots of feedback from TheStreet.com readers, with many suggesting it was an "A-ha" moment. So with this in mind, let's talk about how someone with an IRA or 401(k) and other retirement savings should be positioning their investments. As a prefacing remark, it's worth noting that the Federal Reserve's radical quantitative easing policy has made the world an uncomfortable and risky place for most retirees or near-retirees. The Fed's approach of manipulating the markets, coupled with excessively low interest rates, is forcing this demographic group to be treated differently when it comes to investing. As a result the group as a whole is risking that dollars needed for future expenditures will be spent today. I think in the back of their minds, many investors fear they will be destitute or living with their children. Here's why: Investors have been trained to rely on a conservative basket of investments that I call traditional retirement investments. These include U.S. Treasuries, U.S. bond funds, certificate of deposits, high-yielding money market mutual funds, index growth funds, and fixed annuities. Based on the Fed's new radical approach to monetary policy, this mix has more embedded risk to those near or new to retirement. In today's environment, for many this is not going to work anymore. Here's what I believe is the neo-classical retirement portfolio: Cash: FDIC bank accounts Gold Fixed Income: foreign bonds, corporate bonds, bank loan funds, mortgage-backed securities Equities Dividend-paying stocks Here are some, but clearly not all, funds that investors could consider to fill out the fixed-income portion of the neo classical retirement or pre-retirement portfolio.
Here are some, but clearly not all, dividend stocks that investors could consider to fill out the equities portion of the neo-classical retirement or pre-retirement portfolio.
A few comments are in order regarding the neo-classical portfolio. First, investors will need to wean themselves from index and buy and hold approaches. They will have to find a way to be more active in positioning their assets to capture appropriate levels of income and achieve some growth. I usually recommend individual dividend-paying stocks as a core program and low-cost index funds on the fringe. Second, this is not easy work. Since Street.com readers are generally independent-thinking investors, I say this reluctantly, but with conviction: If you cannot do this on your own, find a registered investment adviser who can help you execute. Nothing wrong using a fee-only adviser to put a plan together for you then coach you along the way. Third, the underlying theme for this group of investors, especially for the equity portion of their portfolios, should be to invest in areas that have lots of hard assets, make necessary items, i.e. non-discretionary, have some kind of monopolistic character and pay above-average current income. To some degree, the portfolio should mirror the areas where retirees and near-retirees are spending their own money: energy, food, water, health care. Fourth, depending on your risk tolerance, Treasury securities can be considered, but only for risk reduction, not current income. At the time of publication the author's clients may own some or all of the securities mentioned. This article was written by an independent contributor, separate from TheStreet's regular news coverage.