Tags: investment | advice | retirement | stocks

Investment Adviser: Don't Let 'Lost Decade' Ruin Retirement Plans

Investment Adviser: Don't Let 'Lost Decade' Ruin Retirement Plans
(Stock Photo Secrets)

By    |   Friday, 27 May 2016 06:00 AM

Conventional investment advice says to gradually shift money from stocks to less risky bonds as retirement age approaches.

Not so fast, says Eric D. Nelson, an investment adviser and founder of Servo Wealth Management.

“For an individual or family who is about to retire or is already in retirement and who needs a rising income stream over several decades, putting most of your money in a diversified portfolio of stocks represents your best chance for success,” he writes in a Seeking Alpha blog that compares the “lost decade” for the S&P 500, whose value fell from 2000 to 2009, with diversified asset allocations.

The key to growing a retirement portfolio is to look beyond the biggest U.S.-listed companies that make up the S&P 500, he says. Stock holdings need to be diversified to include smaller-cap companies and foreign equities.

“The decision of not only how much you allocate to stocks but also what stocks you own has never been more important,” he says. “Start with a portfolio that emphasizes equities, diversify them broadly, stick with your plan and you just might avoid seeing a lost decade destroy your retirement.”

Stock market returns in the past year have been driven by dividends, not earnings, which have declined for many companies, especially in the energy business.

Companies that are paying dividends are also posting better gains, according to strategists at Jefferies LLC.

"U.S. indices whose constituents show increasing dividend payments over time have sharply outperformed since the beginning of the year," equity strategist Sean Darby at Jefferies writes in a report obtained by Business Insider. "A scarcity of 'dividend growth' globally, combined with flattening G7 yield curves, has put a bid on 'U.S. dividend growth stocks,' in our view. U.S. real bond yields have also fallen since November 2015 underwriting income generating stocks."

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Conventional investment advice says to gradually shift money from stocks to less risky bonds as retirement age approaches. Not so fast, says Eric D. Nelson, an investment adviser and founder of Servo Wealth Management.
investment, advice, retirement, stocks
303
2016-00-27
Friday, 27 May 2016 06:00 AM
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