The conventional personal finance playbook for retirees with 401(k)s is to trim exposure to stocks and dial down risk as they age. But many savers over age 70 are defying that rule, packing their 401(k)s with more stocks than experts recommend, according to Fidelity Investments.

Half of Fidelity 401(k) plan participants aged 70 or older have a "higher equity allocation than suggested," more than any other age group and well above the 34% average for all ages, according to Fidelity's 1Q 2026 retirement analysis report. Similarly, nearly four of 10 401(k) savers aged 65 to 69 also have a larger helping of stocks than investment pros recommend.

Whoa, Nellie! Is retirees' love affair with stocks a ticking time bomb that threatens to blow up their nest egg if the market tumbles? Or a shrewd financial move designed to boost returns so they don't outlive their money? Or is it simply a case of taking their eye off the ball and not keeping track of what they own and failing to regularly rebalance their 401(k) holdings?

All of the above, say financial advisors. And that's mainly because every retiree's financial situation is different.

"There's really no right or wrong answer" when it comes to the proper size of a stock weighting in a retirement portfolio, says Mike Shamrell, vice president of thought leadership at Fidelity.

Adds Jared Chase, a financial adviser at Signature Estate & Investment Advisors (SEIA): "I wouldn't want to put people into a box simply based on age." A 50% stock/50% bond portfolio, for example, might not be right for everyone. The optimal asset mix, says Chase, should be based on a retiree's goals, objectives, and risk tolerance.

Shamrell stresses that a "suggested asset allocation" is just that: a suggestion.

For its study, Fidelity compared a 401(k) saver's stock allocation in their overall portfolio with the stock weighting (e.g., equity glide path) in Fidelity's age-appropriate target-date Freedom Funds.

Consider, for example, someone who retired in 2020 at age 65 who is now 70. The total stock weighting in the Fidelity Freedom 2020 Fund (which corresponds to the investor's 2020 retirement date) is 50%. So, a 70-year-old retiree who holds a higher percentage of stocks (say, 60% or 70%) than the recommended 50% weighting in Fidelity's target-date fund is seen as having "a higher equity allocation than suggested."

As the table below shows, half of those aged 70 and older hold more equity than is recommended. By contrast, only 15% of those in their late forties are overweight in equity investments.

Source: 1Q 2026 Fidelity Retirement Analysis

Shamrell says retirement savers can use the equity weightings in age-appropriate target-date funds as a "yardstick" to estimate how much stocks are in professionally managed funds that take a saver's age and risk tolerance into account.

Fidelity conducted the asset allocation analysis as part of an awareness campaign.

"We just want everybody to be aware (of how big a stock exposure they have)," said Shamrell. "The report is sort of a trigger to check their allocation. We don't want to have a situation where individuals have more stocks than they are comfortable with in the event the market goes down. We don't want people to get caught off guard and be like, 'Hey, why did my balance drop so much?'"

Why retirees are overweight stocks

There are many reasons why a retiree in their 70s may hold a bigger-than-recommended helping of stocks, financial advisors say.

Overconfidence. It's not uncommon during bull markets, when market returns are strong, for behavioral biases to impact decision-making, says James Demmert, chief investment officer at Main Street Research. Overconfidence can cause investors to let their money ride when stocks are performing well. "As bull markets mature, investors gain more confidence," says Demmert. "Optimism turns to excitement as the market continues to go up, and they start feeling really smart."

Market appreciation. The mere fact that stock prices are rising can push a stock allocation above its recommended weighting. And if an older investor is managing their own money (which Fidelity says many do) and isn't regularly rebalancing their portfolio to keep their stock and bond weightings aligned with their financial plan, those weightings can easily get out of whack. "Just the market going up can take somebody from 50% stocks to 60% stocks," says Demmert.

Less need for income. A retiree who has a large cash hoard or ample income streams, such as a pension, Social Security and annuities, to cover most or all of their monthly living expenses can use their 401(k) money bucket for longer-term goals, says Shamrell. "If they've got a large pool of savings to fall back on, they can maybe afford to be a bit more aggressive," says Shamrell. If the market is in a steep downturn, retirees whose income needs are covered can avoid selling stocks at depressed prices to generate income.

Chasing returns. Bad investment behavior can also be to blame, says Jason Grover, a financial planning specialist at Grover Financial Services. Buying stocks just because they are going up doesn't always end well. "Chasing returns and just letting things ride, and not rebalancing portfolios," amounts to bad behavior, says Grover. "Don't look at your portfolio as if the stock market never loses."

Fear of running out of money. Retirement these days can last 20 or 30 years, placing a premium on returns that outpace inflation. Stocks fit the bill, as the long-term average annual return of equities is about 10%, handily topping inflation. "A large retirement risk for many affluent households isn't volatility, it's becoming too conservative too early (in life) and failing to maintain purchasing power," says Chase.

Putting too much money in lower-yielding assets like bonds and cash makes it harder to keep up with annual cost-of-living increases, adds Chase.

The risks of retirees loading up on stocks

Suffering outsized losses. The more stocks a retiree holds, the more money they can lose if the stock market suffers a steep decline, Demmert warns. "When these really terrible markets occur, or a bubble pops, the people that can least afford the losses — retirees — are the ones that get hurt the most," says Demmert.

Selling into a falling market. Retirees who rely on the stock portion of their 401(k) for everyday income risk having to sell their equity holdings at depressed prices to pay the bills. "The real risk isn't volatility, it is being forced to sell during volatility," says Chase. Liquidating stocks in a down market can more quickly deplete a nest egg as more shares are needed to raise cash and, as a result, fewer shares are left in the retirement account to benefit from the eventual market rebound.

3 ways retirees can dial back stock exposure

Let's say you read this story and realize that your 401(k) has more stock exposure than you are comfortable with. What can you do?

Here are some easy fixes to get your equity exposure back to where you want it to be:

1. Rebalance. If your plan calls for 50% stocks and 50% bonds and your equity weighting is now 60%, sell equity holdings and put the proceeds into bonds to get back to your preferred asset mix. "We encourage people to take a look at their asset allocation and make sure that it is at a level they want it to be at," says Shamrell. If you're unsure of how big an exposure to stocks you should have at your age, you can get a general idea by looking at the stock allocations in target-date funds that coincide with your retirement date, says Shamrell. Read our comprehensive guide on How to De-Risk Your Portfolio.

2. Sell into rallies. When trimming stock exposure, take advantage of big up days or periods when the market is climbing, says Demmert. You can also set up a regular distribution schedule, such as monthly, until your allocation is back in line with your targets. "Dollar cost average out of the market," says Demmert. This selling strategy helps smooth out market volatility, so you don't get spooked into selling at a market low. "That tends to work psychologically for most people," says Demmert.

3. Always have ample cash reserves. A stock-heavy asset allocation only hurts if you need to sell stocks to raise cash in a down market. One way to avoid that is to keep at least two years' living expenses in a liquid, cash-like account that isn't affected by market swings, says Grover.

When you have ample cash reserves, you can invest more aggressively in stocks and hold more equities without the downside risk of having to sell in a down market.

"I like the fact that retirees are taking on more equity risk in their portfolio," says Grover. "Because owning the great companies of the world is what provides growth."

And growth is good, no matter if you're a 25-year-old investor, a 45-year-old investor, or a 70-year-old investor.

Read more on managing retirement savings

• Top 4 Retirement Withdrawal Strategies to Maximize Your Savings
• The Average Gen X 401(k) Balance Kind of Bites
• How to Retire at 62 and Build a Financial Bridge to a Maxed-Out Social Security Check at 70
• The Sequence of Returns Risk Could Shrink Your Retirement Nest Egg

During your working career, the financial goal is simple: Accumulation. You save, you invest, and you watch the numbers grow.

But as you cross the finish line into retirement, you hit the biggest hurdle in personal finance — the transition to decumulation.

Suddenly, you aren't living on a paycheck; you're living off your portfolio. Does this mean you should automatically become a more conservative investor?

Probably not. While your goals might shift slightly, your asset allocation shouldn't be a knee-jerk reaction to your age.

Instead, it should be a deliberate strategy designed for sustainability, tax efficiency and, perhaps most important, emotional resilience.

How things change, how they stay the same

Any sound investment evaluation starts with a simple question: What should this money do?

For most retirees, the answer shifts toward generating income. To find your new "sleep-at-night factor," you need to look beyond the spreadsheet and consider:

• Net income needs. How much annual income, after taxes, do you need to maintain your lifestyle?
• Fixed income sources. What is the baseline provided by Social Security, pensions or annuities?
• Account diversity. What is the breakdown between your taxable, tax-deferred and tax-free accounts? How much do you have in each?

The real enemy: Sequence of returns risk

During your working years, your average annual return was king. In retirement, average return takes a backseat to timing of returns. A major market dip in the first few years of retirement — known as sequence of returns risk — can be devastating if you're forced to sell equities to fund your living expenses.

To mitigate this, we recommend a liquidity buffer of 18 to 24 months of anticipated distributions. By carving out two years of planned expenses into high-quality, liquid assets such as CDs or money market funds, you ensure the stock market doesn't dictate your monthly "paycheck".

This buffer acts as a shield, giving your growth-oriented investments the time they need to recover from a downturn without being liquidated at a loss.

The withdrawal road map: It's not what you make, it's what you keep

Distributions from retirement accounts are often a retiree's largest tax event. Managing the "tax bite" requires strategic sequencing across your different "buckets":

• Taxable (brokerage)
• Tax-deferred (traditional IRA/401k)
• Tax-free (Roth)

Effective tax bracket management allows you to fill lower tax brackets while avoiding "tax spikes" that can trigger higher Medicare premiums (IRMAA) or unnecessary capital gains taxes.

Tax planning also needs to be a multiyear exercise. Some investors focus on taking assets from taxable accounts first, believing it's better to let tax-deferred accounts grow.

This can often result in two mistakes:

• failing to fully utilize lower tax brackets with taxable distributions
• creating larger than expected IRA required minimum distributions (RMDs) that can combine with delayed Social Security creating a tax torpedo in one's 70s.

Why all accounts are not created equal

One of the most common misconceptions is applying a uniform allocation identically to every account. For a truly optimized plan, you must consider both asset location and tax treatment:

• Roth accounts. These should hold your more aggressive, high-growth assets to maximize tax-free growth in the long term.
• Traditional IRAs. These are often best suited for income-producing assets like bonds or real estate investment trusts (REITs), as the distributions will be taxed as ordinary income anyway.
• Taxable accounts. Prioritize tax-efficient ETFs or municipal bonds here to minimize the annual tax drag on your portfolio.

While managing to a comprehensive asset allocation is sound, each type of account should have its own asset allocation that is tax optimized with the larger picture.

Beyond the spreadsheet

Retirement isn't a signal to abandon equities; it's a time to be more strategic. Your portfolio allocation shouldn't be an arbitrary rule — it should be a customized allocation built around your specific goals, cash flow needs and tax situation.

As you near retirement, a review of your investment strategy makes sense. For some, the transition from your "years to retirement" to your "years of retirement" might require an overhaul, and for others, just a tune up.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It’s the nightmare that jolts recent retirees awake at night: after a lifetime of saving in a 401(k) or IRA, the stock market goes into freefall the day they stop working and keeps going down, putting a sizable crack in their retirement nest egg.

It may be challenging to envision a significant market correction, given that the S&P 500 has gained almost 12% in 2025 and small-cap stocks are at a four-year high. Yet anyone who lived through the Great Recession of 2008 or market volatility during the early years of the Covid pandemic knows that a rosy market can quickly turn dark.

The downside of such an ill-timed market downturn would be especially acute for recent retirees who no longer receive paychecks at work and must start withdrawing from their retirement accounts. The one-two punch of selling stocks in the early years of retirement when share prices are declining in value can deplete a retirement nest egg prematurely and put long-term retirement security into question. This bearish scenario can cause even greater financial pain if the downdraft drags on for a year or longer.

“The order and timing of returns matters greatly in determining how long your savings will last and how sustainable your spending plan is,” says Rob Haworth, senior investment strategy director at U.S. Bank Asset Management. “The challenge is, once you start spending (your nest egg), you’re a little more sensitive to market drawdowns.”

What is 'sequence of returns risk'?

Wall Street dubs this investment hazard “sequence of returns risk.” In a nutshell, the way the math works is portfolio declines that occur early in retirement can have a much more significant impact on your portfolio. These early losses can severely weaken your 401(k) or IRA’s growth potential and its ability to generate the steady income retirees need throughout life, even if the market eventually recovers.

In fact, the sequence of market returns can determine whether you run out of money in retirement or have money left over to leave to heirs, according to a recent study from U.S. Bank Wealth Management.

A tale of two investors

Consider two investors with $1,000,000 in their retirement accounts, planning to withdraw $45,000 per year, with adjustments for inflation in later years. Over the course of their retirements, both portfolios post comparable average annual returns but exhibit different year-to-year performance patterns.

Investor one benefits from three straight years of positive returns (+25% in year one, +10% in year two, and +5% in year three) at the start of retirement. This investor, however, suffers a 15% decline in year four.

Investor two starts off retirement in a down market with declines of 15% in year one, followed by gains of 5%, 10%, and 25% in three subsequent years.

Both investors have identical performance in the remaining years of retirement.

The outcomes, though, are quite different, as shown below.

The first investor benefits from up markets during the initial retirement years, allowing the portfolio to grow despite taking distributions to pay bills. The strong market early in retirement allows the investor’s nest egg “to generate the desired amount of income for 40 years,” the hypothetical study found.

Unfortunately, the second investor, who retired in a year when markets were down, did not have such a rosy outcome. That one year of decline resulted in a significant loss of portfolio value with lasting consequences. Selling assets into a down market meant the portfolio didn’t have enough time to fully recover, significantly damaging the investor’s long-term strategy. This investor ran out of money after 25 years, the study found.

It's clear that withdrawing from retirement accounts in down markets has lasting implications for savers.

“It puts your retirement plan a little more at risk,” says Haworth.

How sequence of returns risk could damage your 401(k)

Let’s say you have $1,000,000 in your 401(k), and you plan on 4%, or $40,000, annual withdrawals, but in your first year of retirement, the market is down 10%. Your $1 million nest egg will quickly be trimmed to $860,000 due to the down market, far less than the $960,000 you’d be left with even if the market is flat.

The downside is twofold. First, you’ll have to sell more shares to generate the income you need to pay bills in retirement than you would if stocks were in rally mode. Secondly, you’ll have fewer assets left in your account to benefit from the eventual recovery. “Once assets are spent, those assets can no longer generate the growth necessary to last through retirement,” says Haworth.

Of course, stock declines later in retirement have a smaller impact on your portfolio. Why? Your portfolio has had more years to benefit from compounding (or gains earned on the remaining principal and prior gains). Plus, you have fewer years of longevity remaining, which reduces the chance you’ll run out of money.

And while the sequence of returns risk hits retirees hardest when the stock market suffers losses for more than a year, that’s rare. Since the Great Depression of 1929, there have been only four periods when the broad U.S. stock market has posted negative returns for two calendar years in a row.

Ways to minimize the sequence of returns risk

The goal is to develop a strategy that avoids having to draw down principal in down markets at the beginning of retirement.

Haworth recommends the so-called “bucket approach, which sets aside a portion of your money for short-term needs and later phases of retirement.

The bucket strategy

The first bucket is a so-called “liquidity” bucket to meet your short-term cash needs in retirement, such as paying the mortgage and cable bill and buying groceries. This money should be parked in safe investments, such as high-yield savings accounts, CDs, and short-term bond funds, which have minimal exposure to market fluctuations. “Let the market recover before you start taking withdrawals from the volatile piece of your portfolio,” says wealth advisor Jim Elios, founder and CEO of Elios Financial Group.

Having one to two years of cash on hand should help you avoid tapping depressed assets even in prolonged downturns.

“This money is meant to be that cozy safety blanket that’s there for you when you need it,” says Haworth. With cash yields remaining historically competitive compared to the last decade, it’s also a way to earn some income while the money is sitting idle, adds Haworth.

Bucket number two should address short- to medium-term savings goals and can be invested in a diversified portfolio of stocks and bonds, such as a 60/40 stock-to-bond portfolio. It is not advisable to be 100% invested in stocks, as a big market drop early in retirement might make it too hard to recover from.

“Diversification is very important,” says Haworth. A 50/50 stock/bond mix, for example, means if the stock market is down 10%, your portfolio might only be down around 5%. Those smaller losses add more resilience to your spending plan, as your nest egg will suffer smaller losses. In short, this bucket should include a diverse range of asset classes in the portfolio, allowing you to identify an asset that has increased in value and opt to sell it if desired, rather than being forced to liquidate assets that have decreased in value.

“If you have the flexibility to do so, definitely take withdrawals from the asset classes that have held up, and delay withdrawals from the declining stock portion of your portfolio,” says Elios.

Your final bucket can be investments with long-term growth potential that have time to ride out any market storms.

Reduce your distributions

Another way to mitigate the sequence of returns risk if you must tap your portfolio for income is to reduce your annual distributions. If you had planned on a 4% annual withdrawal rate, you might dial that back to 3%. Another strategy is to take withdrawals from funds in your retirement account that are in the green.

Fold the risk into your retirement plan

Evaluating how the sequence of returns risk could impact your retirement security should always be part of your broader financial plan, says Nick Bour, founder and CEO of Inspire Wealth.

“You should absolutely look at how it could impact your investments going into retirement,” says Bour. Ask yourself, “Should I be looking at a more conservative asset allocation as I enter my first phase of retirement and not be hurt negatively (by a market downturn)?”

Read More

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• The Average 401(k) Balance by Age
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• How to Retire at 62 and Build a Financial Bridge to a Maxed-Out Social Security Check at 70

Acing all the key components of retirement planning is akin to getting a perfect score on the SAT college entrance exam. It’s not impossible. But for most people, it’s a long shot. And just as a prospective college student may seek help preparing for the SAT, it often makes financial sense for everyday Joe and Jane 401(k) plan savers to seek a financial adviser to help them map out a retirement strategy.

Even 401(k) do-it-yourselfers who did just fine during the nest-egg accumulation stage realize that there’s a lot more complexity in the so-called “distribution phase” when work paychecks stop and paying the monthly bills relies on the retiree’s own assets and retirement plan.

It’s not easy for a DIYer to figure out how much income they’ll need for retirement. Key questions may seem straightforward, but they may quickly get complicated. For example: what funds should I invest in; how should I divvy up assets between stocks and bonds; when should I take Social Security; how should I manage required minimum distributions (RMDs); what financial accounts should I withdraw money from to save on taxes; and should I convert a traditional IRA to a Roth IRA?

That’s a mouthful. However, the laundry list of retirement puzzle pieces is designed to illustrate that coming up with a perfect retirement plan on your own is challenging. For most people, it’s simply too heavy a lift.

When the job of overseeing your retirement-related finances becomes too complex or overwhelming, getting help from a financial adviser could relieve some of the burden. Indeed, working with a financial adviser acting as a fiduciary (e.g., someone who puts your best interests ahead of their own) can go a long way toward helping you get your finances on track, whether you’re nearing retirement or already enjoying your golden years.

The financial adviser, who offers services ranging from retirement planning to portfolio advice, risk management, and tax planning, will assess your financial position holistically and develop a financial plan to help you set and achieve your goals and desired lifestyle in retirement.

So, if you’re looking for a financial pro to help you plan for retirement, where do you start?

How to find a financial adviser for retirement

Word of mouth: One way to jumpstart your search for a financial adviser who specializes in retirement planning is to ask friends, family members, and professional contacts for referrals. Getting recommendations from people you trust, especially your accountant, attorney and other so-called “centers of influence,” can get the ball moving.

Look into a large brokerage firm: Another good option, especially if you already have a relationship with an investment company or brokerage, such as Fidelity Investments, Charles Schwab, Vanguard, or T. Rowe Price, to name a few, is to investigate the relatively low-cost advisory options, retirement planning solutions, and investment options these well-known firms offer. These services typically range from digital advice to a more traditional advisory relationship that includes your own dedicated adviser. In fact, many financial firms, including Schwab and Fidelity, have an adviser search tool on their websites,

Use industry group search tools. Tapping the resources of industry groups representing financial advisers and financial planners is also helpful. For example, the National Association of Personal Financial Advisors (NAPFA) helps you initiate contact with a financial adviser in just a few clicks. Similarly, the Certified Financial Planner Board offers a search tool to find advisers who have earned the Certified Financial Planner (CFP) designation. Some sites allow you to search by zip code, assets under management, area of specialty (such as retirement planning or estate planning), and by the type of client the adviser focuses on (e.g., women, retirees, or LGBTQ).

Financial planning networks: These networks are another excellent resource for locating financial advisers, according to NerdWallet. Examples include XY Planning Network, whose advisers hold the CFP designation and offer virtual services; and CHIP, which focuses on matching clients with African American, Hispanic, and Latinx financial advisers.

Check each adviser's certifications. You’ll run into acronyms for financial certifications and credentials when searching for financial professionals. A CFP, for example, stands for a certified financial planner. This financial professional has passed a comprehensive exam on financial planning topics and has met a minimum threshold for hours worked in a financial planning capacity. CFPs are held to a standard that requires them to act as fiduciaries. You may also encounter a ChFC, which stands for Chartered Financial Consultant, or an RIA, a Registered Investment Advisor.

Do your due diligence. No matter their credentials, ensure you check their professional background, Fidelity Investments advises. “That means treating them like you would any other person you were considering hiring for a job: by looking at their resume or LinkedIn as well as asking for references,” Fidelity noted in a blog post. You can also run a free background check using the Securities and Exchange Commission’s Investment Advisor Public Disclosure database or FINRA’s BrokerCheck system.

Ask these questions before you hire a financial adviser

Michael Cherny, head of Citizens Wealth Management Advisors, recommends getting to know a potential financial adviser better by asking key questions during your first introductory meeting. “Your first meeting can help determine if the financial advisor is a good match for you professionally and personally,” Cherny wrote in a blog post.

Here are the questions Cherney recommends you ask:

• What are your experiences and qualifications? Find out how long they’ve been in the industry and if they have any specialty designations like a CFP or if they specialize in retirement planning.
• Have you worked with people like me before? You can often find a better match, says Cherny, if the adviser commonly works with clients your age and income range and who share similar retirement goals.
• Do you manage investments, prepare financial plans, or both? Make sure the adviser specializes in the area you need help.
• How do you approach investing? You want to ensure that the adviser invests in a way that you are comfortable with and that aligns with your risk tolerance and goals.
• How will we communicate? Get a sense of how frequently you’ll touch base with your adviser. Will it be a monthly, quarterly, or annual check-in? And find out whether you will meet by phone, in person, or digitally. Ask to see a demonstration of the financial software your adviser uses.
• How do you get paid? As noted below, financial advisers are compensated in several different ways. They can charge you based on the amount of money in your account, by the hour, or a flat fee. So, make sure you find out what payment system will be used and that you’re comfortable with that arrangement. “You may also find advisers who earn commissions by selling investments,” says Cherny. Commission arrangements should be evaluated carefully, as advisers can earn commissions by putting you into specific mutual funds or other types of investments when there might be lower-fee options available.

How much do financial advisers charge?

The cost of a financial adviser depends on how the financial professional charges for their services. Here are the common pricing structures:

Assets Under Management. Often, financial advisers charge a percentage based on assets under management — or how much of your money they manage. The industry median charge is 1% (meaning half charge less and half charge more), according to Fidelity. So, if a financial adviser is managing $500,000 of your money and charges 1% of assets under management, their services would cost you $5,000 per year. But it’s possible to get advice for less due to the competitive nature of the business. So, shop around and compare the costs for advice based on assets under management.

Hourly. Some charge by the hour, not by the balance in your account. Rates range from $200 to $400, according to financial website NerdWallet. Going the hourly rate route is a good option if you just want to set up, say, a basic retirement savings plan, or you want an adviser to analyze the holdings and asset allocation in your 401(k) to see how much income that will generate, as well as let you know if you’re on track for retirement or whether any tweaks to your portfolio are necessary to reach your goals.

Flat fee. Some financial advisers charge a set fee based on the work they do. This pay structure is akin to an à la carte menu at a restaurant, where each menu item you select comes with its own charge. A financial adviser, for example, may quote you a set one-time fee to create a comprehensive financial plan for you.

Should I use a robo-adviser to save money?

Not every investor has the time or money to hire a real-life financial adviser to help them with retirement planning. Some people have simple goals, such as saving for retirement or planning a 4% annual withdrawal strategy, and therefore don’t require a comprehensive retirement financial plan. For these people, a robo-adviser may be a good option. Robo-advisers can deliver digital portfolio management and asset allocation decisions at a fraction of the cost of a traditional adviser.

There are several factors to consider when choosing the best robo-adviser for you.

Keep in mind that some digital robo-advisers, including Facet Wealth and Empower, as well as many big brokerages and mutual fund companies, also offer virtual access to a human financial adviser if a financial plan is needed.

Red flags when hiring a financial adviser — avoid the sharks

Zoe, a wealth platform that vets independent financial advisers and connects them with people seeking advisers, highlights key red flags to watch out for when shopping for an adviser.

For one, you’ll want to think twice about joining forces with an adviser who focuses on short-term performance rather than a long-term plan. You should also tread carefully with advisers who claim to consistently outperform the market. Advisers who push products, such as mutual funds or annuities, for which they earn a commission, are another red flag. It’s also important to vet financial advisers to ensure they have no record of unethical or illegal behavior.

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The 60/40 portfolio, consisting of 60% U.S. stocks and 40% U.S. Treasury bonds, has become the cornerstone makeup of most portfolios ever since John Bogle of Vanguard released their Balanced fund several years ago.

Generally in most years, the 60/40 portfolio has provided good returns, with some years going below expectations. In some cases, such as during periods of recession, U.S. stocks go down; in other cases, the selected stocks in the 60% allocation may not have been the best that could have been picked.

As a general statement, if you believe in the U.S. economy and government, the 60/40 allocation should work well for most people. As the U.S. economy grows, a well-selected set of stocks from the S&P 500 coupled with long-duration Treasury bonds and some short-term bills, if managed well, should give decent returns for most years.

The problem is if the assumption above is no longer true. For example, during periods of recession where the economy shrinks or contracts, stock share prices generally fall to reflect the projected smaller discounted present value cash flows they would get.

If Congress fails to rein in spending, then the U.S. debt-to-GDP ratio will keep growing. At some point, bondholders might hesitate to buy more bonds because the U.S. then becomes like a credit card holder who does not pay their bills but still insists on charging more to their card.

Then the U.S. Treasury will likely be forced to offer higher yields to attract buyers, which would raise our interest payments and thus our deficit even further. Plus, when the U.S. prints more money that is backed by debt and not actual revenue from tariffs and tax collections, inflation rises and further dampens the real economy because of the excess currency in the system.

Let me bring up the concept of an uncorrelated hedge. Correlation is when something closely follows another thing. An inverse correlation is when the opposite is true. Zero correlation is when the two things have no relationship.

Thus, if you wear a blue shirt and your friend shows up in a blue shirt, you two are positively correlated. If you wear black and your friend wears white, or vice versa, then you two are negatively correlated. If there is no pattern between you two, then there is no correlation. Note that “correlation does not mean causation,” as experts like to say, but heck, if two prices appear correlated, then that matters, right?

I believe that with the current situation, it is wise to have an uncorrelated hedge to the 60/40 allocation. Maybe 4%, more or less, but the actual ratio is up to you. Thus it might be more like 58/38/4, but you determine what it should be.

An uncorrelated hedge, like the shirt example implies, is a hedge (or protection) against situations where both stocks and bonds underperform, partially due to the reasons I described earlier. In other words, you want some of your bets to win to counteract losses in others. If all your bets are correlated, then you will lose on all of those.

Some possible uncorrelated hedges include gold, silver, ETFs, cryptos, commodities, oil, futures, fine art, luxury watches and others. Their price movements do not necessarily mirror the movements of stocks (though they sometimes do).

The thing to remember is that you need to keep these allocations to these risk-on assets small, just enough that if these go to zero, you might have a bad day but not enough to wipe you out. You also want to pick risk-on assets that have a high chance of outperforming the S&P 500 if these do well. In plain English, if you are going to take a risky bet, it better be worth it if you actually win. Otherwise, what is the point of the risk?

In financial parlance, an asset should have a high alpha (return over the S&P 500) and ideally a low beta (volatility). However, sometimes the outsized returns come from highly volatile and very speculative assets such as cryptos.

The way to approach this is that if you feel that an asset is extremely volatile price-wise, but can have a potential exponential return, then size your position so that it is small. If you lose, you will not lose much; but if it goes exponentially parabolic, you at least have a small position in it that could potentially offset any losses from your “safe” 60/40 allocation. Even if you do not fully understand what I just wrote, you already instinctively know this.

Is the 60/40 portfolio still relevant? Not in its pure form. I think it needs a third but small allocation to uncorrelated risk on hedges to make it roughly more like 58/38/4, where the 4% (the actual percentage is up to you) goes toward uncorrelated assets.

There are no guarantees in life. No one can predict the future. You could get run over just crossing the street. But if you are hedged properly with a small amount of uncorrelated assets, you might actually grow and preserve your capital despite the many rocky situations you might encounter in the future.

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

As part of our financial planning process in the early 2010s, we would slide a bulleted to-do list across the table to our new clients with 15 to 30 action items.

Can you imagine anyone giving you a list that long and being excited about it, much less, being willing to tackle it?

Fortunately, a fellow planner with a bit more common sense introduced me to the idea of quarterly sprints: Take two or three of the most impactful and timely things and tackle them in the first 90 days.

Do the same thing the next quarter. And so on. Essentially, eating the elephant one bit at a time.

Here’s my list of three very impactful, low-resistance exercises for retirees.

1. Consolidate your accounts

Joining banks for promotional deposits and spreading out your investment eggs into several different custodial baskets is now a thing of the past for you. Imagine walking across the street and getting hit by an ice cream truck (better than the bus alternative).

Having your accounts scattered is like having a pocket full of change. Your kids will be on their hands and knees trying to make sure they find all of the money. They may not. You want a checkbook to fly out of your pocket instead.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Every bank account tells a story. This credit union received my direct deposit when I was at that agency. I picked this bank so we could transfer money to our kids while they were in college. Most of those stories are over. Consolidating bank accounts can be a pain, and I hesitate to call it “low resistance.”

However, either you do it while you’re alive, or your kids/beneficiaries do it after you’re dead. It’s much easier while you’re alive.

Like bank accounts, there’s typically a story behind each one of those retirement accounts. I get it. I have an old one hanging out there that has been on my to-do list for quite a while.

But the justification of keeping several accounts as a risk management tool no longer resonates.In fact, the more accounts you have, the more risk you have. Responsibly managing accounts across several platforms is about as easy as it was to get my daughter’s soccer team to stay in their positions in their first year of rec soccer.

The good news is that many custodial platforms are open-architecture, meaning you can hold pretty much everything that is publicly traded on them. You don’t need to hold XYZ mutual fund on their custodial platform.

2. Review beneficiaries

I have seen the worst-case scenario play out here, where an ex-spouse received, and did not return, life insurance proceeds. In most cases, I just find inconsistency between accounts and a lack of alignment with the estate planning documents.

Once again, this is understandable, as you establish beneficiaries when accounts are established and there are no forcing mechanisms, outside of a terrible situation, to update them. We do this once a year with our clients.

Updating beneficiaries is not a replacement for updating your estate planning documents. Rather, it is a Band-Aid to make sure the right people get the money, not necessarily get the money the right way.

Think of this in the ice cream truck example as writing names on each of the coins in your pocket. At the very least, your kids will know which coins to pick up.

As you update your beneficiaries, you should also be considering the ownership structure of each account. But for the purpose of this article, those are bonus points.

3. Rebalance your accounts

We have been in a secular bull market since 2009. We’ve seen pauses and even a few bears, but stocks are up a lot. If you started with a 60% stock portfolio at any time in the last 15 years, you no longer have it.

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Your stocks have moved up faster than your bonds and you now have more exposure to market swings. I have seen people wiped out who thought they had hit their “number.”

Remember, concentration may build wealth but diversification is more likely to preserve it.

It can be difficult to see exactly what your exposure is if you have several accounts. Most financial planning programs can show you your aggregate asset allocation if you enter it at the account level. You can use a free version of our software.

We handle most broad-based rebalances at the beginning of the new year to avoid tax surprises in the current one.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you hope to leave money to your descendants but want a say in how that money is used, a family trust can let you exert control even after you're gone.

Your choice of who serves as trustee can dramatically influence how closely your wishes are carried out, as well as whether your children or grandchildren end up feeling grateful for your generosity and foresight — or squabbling about how the funds are spent.

That trustee choice is one of the basics of good estate planning. Unlike the executor of your estate, whose job begins at your death and ends when assets are distributed, the trustee of a family trust has ongoing responsibilities to oversee distributions, handle reporting requirements, manage investments and pay taxes each year.

The trustee must communicate with all the beneficiaries of the trust, ensure everyone understands the purpose of the trust and their own responsibilities and handle any disputes or questions that arise. But not everyone is well-suited to — or ready to shoulder the burden of — these duties.

Leave money to your descendants the right way

“How assets are distributed becomes a touchy subject,” says Zaneilia Harris, a financial planner based in Upper Marlboro, Maryland. “Setting up the trust right can avoid your heirs going to court or having fights among themselves.”

“Being a trustee can be a large and thankless job where even the simplest things can run off the rails,” says John M. Goralka, an attorney in Sacramento, California.

One of his clients agreed to serve as a trustee — declining payment — for his elderly neighbor who was sick because relatives from out of state had moved into the neighbor’s house and started pilfering belongings.

But after the neighbor’s death, things really got bad. The house went to two siblings equally, but one of them moved in and started acting oddly in addition to dealing drugs in the neighborhood.

The trustee “was on speed dial with the police,” Goralka recalls. “The brother was walking around the neighborhood with a bathrobe on, talking to the mop.”

To avoid such a nightmare scenario, you can take a few key steps.

Pick the right trustee(s)

Typically, you’re the trustee for a revocable trust as long as you're capable. You also name a successor trustee who becomes trustee after your death and, at that point, the trust becomes irrevocable.

When choosing a successor trustee, the primary options are a family member, friend, professional trustee or a bank trustee. Regardless of the type, any trustee acts as a fiduciary and is subject to government oversight and rules. There are pros and cons to each choice.

The three most important character traits for a trustee, Goralka says, are honesty, the ability to follow through on many details in a timely manner and communication skills. If you decide to have two co-trustees, add a professional trustee as a third vote in case of ties.

“The biggest area that creates problems in trust administration is failure to communicate,” Goralka says, such as not letting beneficiaries know if state laws or bank requirements are holding up funds. “If somebody is waiting for their money or nobody tells them what’s in the trust, the silence can be deafeningly loud.”

A family member or friend will likely know you and the trust beneficiaries best and be able to handle delicate situations. They might be more available to explain the trust and to make distributions in emergencies — unlike a bank trustee, which might be a committee that only meets two or four times a year to approve distributions.

Choosing a friend or family member as a trustee has a few possible downsides. They might move away or grow distant in the years between setting up the trust and your death. Your choice might alienate other family members, especially if you select someone unexpected — such as putting a younger sibling in charge of older siblings.

Candice, 54, a preschool teacher in Potomac, Maryland, and the youngest of four, disapproves of her mother choosing the next oldest sibling, her brother, to serve as trustee.

“She knows we don’t get along, which is why I’m like, ‘How can you choose him?’ ” says Candice, who asked to be referred to by one name to avoid harming family bonds. “It has not helped our relationship.”

A bank or professional trust might be a better option to avoid this kind of friction. Another reason to ask a professional to be a trustee is if a family member or friend could have a conflict of interest by being a trust beneficiary or being swayed by personal relationships. A professional could also bring more experience and knowledge of finances, investing and trust and estate law.

A professional trustee, such as those recommended by the National Plan Alliance, can be more affordable and flexible than a bank trustee, who typically charges thousands of dollars a year or up to 1.5% of assets under management.

You can find a professional trustee at many nonprofit organizations that provide services related to disability or elder care. Availability and cost depend on your state and the services needed but can be as low as a few hundred dollars a year.

On the downside, professional and bank trustees might have limited hours or availability to take questions. Some bank trustees might steer funds to investments in their own trust departments, limiting the potential earnings.

However, professional trustees generally carry insurance policies that would reimburse your beneficiaries in the case of misallocation or mismanagement of funds.

Communicate about assets and your wishes

Once you’ve chosen a trustee, you can make things easier for that person by listing all the assets you want in the trust and ensuring the trust is properly named as the beneficiary for those accounts.

A trust and estate lawyer should draw up the trust documents so that your wishes are clear and the trust's purpose aligns with state law. Make sure everyone knows where the trust documents are and that each person — and your estate attorney — has a backup.

Have a family meeting to talk about estate planning with all trust beneficiaries. Explain what the trust is for, your wishes for its use and your reasoning for choosing the trustee(s).

“Use language that’s not negative about why you’re choosing someone,” says Goralka. At the same time, be careful not to open the door for a lawsuit if you give a reason that a disgruntled relative could dispute. “You want to make sure you have good family dynamics in place.”

Additionally, it can help to write a letter explaining your goals and values so that your trustee has more information with which to make decisions about circumstances that you didn’t foresee.

For example, perhaps the trust is intended to pay for your descendants’ educational expenses and career training, but one of your grandchildren decides to start a small business instead of attending a traditional four-year college. If your trustee knows that you value entrepreneurship as long as the individual has a solid business plan, they can be more comfortable distributing trust money for that purpose.

Mindy Greiling, 76, an author and retired state legislator in Roseville, Minnesota, and her husband, Roger, 80, named their daughter Angela, 49, as successor trustee for a trust to benefit their son Jim, 48, who has schizophrenia.

While Jim is currently stable and managing his finances responsibly, in the past, he ran up hundreds of thousands of dollars of credit card debt. The trust specifies allowable uses, such as healthy food, annual family trips, dental procedures, prescription drug costs not covered by Medicaid and other expenses beyond day-to-day living costs.

“We’re a family who talks things out, and we’re not afraid to talk about death. It’s such a peace of mind to know that Jim will be provided for,” says Greiling, who didn’t choose a professional trustee because she wants Jim to work with someone who cares about him and is more available to support his needs. “We picked Angela purposely because she’s very responsible, trustworthy, conscientious and free.”

Make sure your trust stays current

Trusts are a terrific way to provide for a relative who has a disability. They protect assets from creditors and ensure the disabled relative doesn't lose government benefits because of a direct inheritance.

The Greilings initially set up the trust because Mindy’s mother wanted to leave her grandchildren an inheritance, but if Jim received more than about $2,000, it would disqualify him from receiving Social Security disability payments.

Make sure that you account for these kinds of special circumstances when planning the trust and picking a trustee — and regularly update documents in case something has changed. In addition to choosing a trustee or trustees, select additional successor trustees in case someone dies, becomes incapacitated or is otherwise no longer available.

“Life is unpredictable. You don’t know what’s going to happen,” Goralka says.

Sarah, 57, a social worker in Virginia who asked to be referred to by one name to avoid causing family friction, found out the hard way about the cost of using the wrong trustees. Sarah's grandparents appointed her mother and uncle as trustees of a family trust along with their attorney, but there was no successor trustee.

The attorney died in a plane crash and the brother resigned, leaving Sarah's mom struggling to find documentation and comply with tax and reporting requirements. Then Sarah's mom died, naming Sarah her successor, and the COVID lockdown made everything harder.

“It’s one big mess that I now have to untangle all by myself,” she says. “My mother and my uncle did not follow the trust instructions for a distribution that they made over a decade ago. That distribution has to be corrected before the trust can be closed and the final tax return completed.”

As Harris observes: “You should revisit the family trust every three to five years to make sure these are the same people you want to be in the different positions you’ve allocated in the trust.”

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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There’s a lot of fear surrounding financial security in retirement. Many worry they won’t be able to afford to stop working, while others say they have no money saved for retirement.

A report from AARP found 20% of adults 50 and older have no retirement savings, and 61% are worried they won’t have enough saved to support themselves. Meanwhile, 7 out of 10 say they’re worried prices will rise faster than their income.

Imagining all the what-ifs in retirement can be paralyzing. Financially planning for the unknown sounds nearly impossible, but it doesn’t have to be. Creating a thorough financial contingency plan can help you prepare for the unexpected, minimizing your risk of financial loss and instability.

At its core, a financial contingency plan ensures your retirement savings can withstand various risks. This includes preparing for inflation, health care and medical expenses, the future of Social Security, longevity and even the death of a spouse. With so much at stake, how can you ensure your financial plan accounts for everything? The key is to break it down and attack each component one step at a time.

1. Establish an emergency fund.

You’ve likely heard the importance of establishing an emergency fund, but data shows a lot of people are lacking one. A recent Bankrate survey found more than 1 in 4 people say they have no emergency savings. Meanwhile, nearly 59% of U.S. adults say they’re uncomfortable with their level of emergency savings. Regardless of where you fall, the important thing is to establish one and contribute to it regularly.

Money contributed to the emergency savings account should be used to cover any unexpected costs from medical emergencies, home and car maintenance repairs, even the sudden loss of income. A good rule of thumb is to ensure you’ve got at least three to six months’ worth of living expenses saved in the account at all times.

2. Maintain a diversified investment portfolio.

The next component of your financial contingency plan should focus specifically on creating and maintaining a diversified investment portfolio. The key here is to balance your asset allocations to manage risk. This goes beyond investing in stocks and bonds. Investing in mutual funds, ETFs and real estate can help bolster your portfolio. Putting money into a high-yield savings account and opening an IRA is also helpful. But it’s not enough to diversify your investments — you must rebalance those allocations as time passes. This will help you manage risk and mitigate financial loss.

3. Prepare for health care costs.

Planning for health care is a particularly stressful aspect of retirement planning — especially with today’s life expectancy rates. On average, people are living longer now than they used to. According to the CDC, the average life expectancy for men is just under 75. For women, that number jumps to 80.

Unfortunately, the risk of illnesses and health conditions increases as we get older. Medicare is a helpful option, but it also might be a good idea to purchase long-term care insurance. This can help cover the costs of in-home care, as well as nursing home and assisted living facility stays.

Annuities with long-term care benefits may also be another option. Consider meeting with a financial adviser to review options that are best suited for you.

And don’t underestimate the power of a healthy lifestyle. Making the effort to be proactive about your health in the present can help you save hard-earned dollars in the future.

4. Create more than one income stream.

Establishing multiple streams of income is your next area of focus. Unfortunately, many jobs are doing away with pensions, and the future of Social Security is always hanging in the balance, mostly for those who are decades from retirement. Nevertheless, it’s not a good idea to rely on one income stream. This is where your investments become even more important.

Consider owning rental property, investing in CDs, working a side hustle or even creating online courses. A nice mix of various income strategies can help you maximize your earning potential, possibly allowing you to continue generating wealth well into retirement.

5. Be sure to account for inflation.

As you’re building your financial contingency plan, it can be easy to forget about adjusting for inflation. However, not accounting for inflation can financially hurt you down the road. Make investments that typically outpace inflation, such as equities and real estate. Inflation-protected bonds might also be another good option.

If you’re planning to receive a pension or purchase an annuity, see if they include cost of living adjustments (COLAs).

Finally, avoid holding on to too much cash. In periods of high inflation, your buying power decreases. So make sure you’re spreading your wealth and reevaluating your portfolio when inflation is on the rise.

Planning for the future can feel overwhelming at any phase of life — especially when it comes to retirement. However, breaking your plan down into these various categories can make it more manageable. Each step can allow you to focus on a specific area and plan accordingly. A financial adviser can help you figure out where to start, providing you with strategies that are best suited to your goals and financial situation.

These independent views and opinions are those of Joel Russo and are not necessarily the opinions of CoreCap Investments. Securities sold through CoreCap Investments, LLC, a registered broker-dealer and member FINRA/SIPC.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Even if your estate plan is in order, it won't be of much help to your heirs if they can't locate important documents when you're no longer around. Organizing your financial and estate-planning documents — and letting your family know where you've stored them — will make it easier for your loved ones to care for you if you become incapacitated, and it will smooth the process of settling your estate after you're gone. Plus, while you're still alive, you'll be able to quickly track down paperwork when you need it.

Sandra Batra, 56, created a binder to organize all of her father's documents after he was stricken with cancer in 2011. Batra says the project helped her and her mother easily locate her father's important documents while he was in the hospital.

After her father's death in 2012, Batra decided to turn her idea into a business, LifeLink Consulting, which helps clients organize estate-planning documents into a binder or flash drive. Batra also gives clients blank worksheets they can use to provide other details, such as who they want to care for them and their end-of-life wishes. Her online course costs $99.

To organize your own records, you can use an accordion file or binder and divide the documents into different categories, such as estate planning, life insurance policies, property titles and investment statements.

You should also include categories for health insurance, long-term-care insurance, and bank account and credit card information. That way, your family will have the details they need to pay medical bills if you're hospitalized for a long period.

Use Microsoft Word or Google Docs to write down additional details, such as who you want to take care of your pets, a list of subscriptions and memberships, and passcodes to any home security systems or online accounts. Once you draw up the documents, print them and place them in your binder (you can also store them digitally — more on that below).

Where to keep your documents

Store your documents in a secure area, such as a locked filing cabinet or fireproof safe in your home. Make sure your loved ones know the location of your cabinet or safe, and give them any keys, combinations or codes required to access it.

If you don't want to keep the documents in your home, you can entrust them with your estate lawyer, says George Taylor, estate attorney with Brinkley Morgan.

"Your estate attorney can store original documents, like your will and titles to your house and car. Then you and the executor of your will can have copies," he says.

You can put copies of your will and other important documents in a safe-deposit box, but it's usually not a good idea to keep originals there if you're the sole owner. After your death, the bank will seal the safe-deposit box until an executor can prove he or she has the legal right to access it. That could lead to long and potentially costly delays before your will is executed.

Digital options for financial paperwork

You should keep original, paper versions of your will, power of attorney and other key estate-planning documents. But if you'd like to create a backup of your paper documents, consider using a flash drive, which you can plug into your computer's USB port, to collect them all in one place.

Alternatively, you can use a cloud storage system, such as Microsoft's OneDrive or Apple's iCloud. OneDrive's free version gives you 5 gigabytes of cloud storage. Its family version, which allows up to six individuals to share and access documents, costs $129.99 a year.

Apple's iCloud Drive provides 5GB of free storage. For 99 cents a month, you can upgrade to iCloud+, which provides 50GB of storage, and you can share it with up to five family members.

Another option to consider is Quicken's LifeHub. It's an online document storage solution that helps you gain easy access to copies of important financial documents whenever you need them. It's also ideal to protect files from wildfires, floods and any other threats that could damage your home.

Your heirs will need passwords to log in to your online accounts, so make sure they have easy access to them. You can write them down in a document to store in your binder or use a secure password-management tool.

A family membership to 1Password ($4.99 a month after a two-week free trial) offers shared account access for up to five family members. With Bitwarden, you can share your account with one other person free. Or sign up for a family membership ($40 a year), which allows access for up to six people.

How to make updates in paperwork

Batra recommends updating your documents each time you have a life change. For example, you may need to alter the beneficiaries in your will or life insurance policies if you get divorced or have grandchildren, and living trusts should be updated to reflect the purchase or sale of property included in the trust. Even if you haven't undergone any big changes, check your documents at least once a year to make sure the information is current.

If you entrusted your estate attorney with your documents, he or she can also help you keep them up to date, Taylor says. Ask your estate attorney to send you an annual e-mail or letter reminding you to update your information and make sure the right person is still in charge of your affairs, he says.

Key documents to share with your family

Make sure to include the following information in a binder or digital file:

• Will or trust
• Powers of attorney for finances and health care
• Organ donation form
• Living will
• Letter of instruction for your heirs
• Beneficiary designations
• HIPAA release (allows health care providers to share information about you with authorized individuals)
• Bank and financial statements
• Real estate deeds and titles
• Retirement-account documents
• Life insurance policies
• List of important personal property, such as jewelry and artwork, and estimated values
• Funeral instruction

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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I recently returned from a golf trip to Bandon Dunes in Bandon, Ore. If you’re a scratch golfer, I imagine this is heaven. If you’re like me, it’s a place just south of heaven where you go to lose all your confidence in your golf game. Vacations have always been a great place for me to think creatively. Most of my business marketing ideas come from the clarity of being out of the office. This trip was different. For five days, all I could think of was: “Easy swing. Follow through.”

It made me think what the “easy swing and follow-through” of retirement planning is. In other words, what are the simple fundamentals that will lead to good results?

Let’s start with that easy swing.

1. The alignment of your stance is the equivalent of your financial plan.

In its purest sense, your financial plan ensures that your assets are aiming in the direction of your values and goals. If you want to help ensure your plan is on the right track, you can build one for free here.

2. Your club equals your asset allocation.

It’s just as tempting to buy Nvidia (NVDA) right now as it is to try to drive that short par 4. It’s probably better to swing easy and get there a bit more slowly rather than lose your ball in the water because you were greedy. Putting it more concisely, don’t swing for the fences if you’re retired or about to be.

3. The actual swing equals what you can control.

In golf, you can’t control the conditions. In retirement planning, you can’t control the market or the economy. Here are the things you can control and should focus on:

Cost. According to S&P Global, over 87% of all active large cap mutual fund managers did worse than the S&P 500 over the last 15 years, ending December 31, 2023. Why? Cost is one of the biggest drivers of underperformance. It creates a hurdle that fund managers must, but often don’t, overcome. It’s the biggest reason we don’t like to have mutual funds in our client portfolios. Of course, there is a time, a place and even a few winners, but we take the sure thing of low-cost.

Consolidation. All of your accounts tell a life story. I had this 401(k) from that employer. I signed up for this bank account to get a $500 bonus. In retirement, simple beats optimal. There are so many flexible, low-cost investment platforms that there is no good reason to have a lot of different investment accounts. They become too hard to manage and withdraw from, and they create a mess for your beneficiaries.

Asset location. This is the lesser-known cousin of “asset allocation.” Try to hold the right type of investments in the right places. For example, income from REITs is considered ordinary income, so REITs should be held in a retirement account. Growth stocks tend not to pay dividends, so they should be held in taxable accounts.

The follow-through includes the things that, even if you do easy-swing issues one through three above correctly, can prevent your ball from flying according to the plan. Here are the biggest misses I see on the follow-through:

1. You’ve done no tax planning.

We’ve all heard the saying, “It’s not what you make. It’s what you keep.” This is that. I’ve seen people so focused on getting their investments perfect that they miss big tax opportunities and end up paying six or seven figures more than they have to in retirement, in taxes.

2. You’re not sufficiently insured.

Insurance planning changes in retirement as you shift from insuring your income and liabilities to insuring against major health events. Many people have no choice but to accept the fact that going into nursing care for a prolonged period will wipe them out. Most of our clients want some sort of protection against this risk, even if it’s just the equity in their home.

3. You didn’t follow through on the estate planning.

Drafting a will and/or trust is not enough. There is typically a set of instructions on assets that need to be retitled or beneficiaries that need to be designated. Until this happens, you just have a big binder full of paper.

It turns out there’s more than I thought to an easy swing and a follow-through. I’m feeling better about my golf game already.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In his forthcoming book, The Soul of Wealth, Dr. Daniel Crosby tells the story of how dominant Xerox was in the tech space. When Apple and Microsoft came along to create personal computers, Xerox chose not to invest in R&D. By the time its PC, the Xerox Star, hit the market, it was too late. The point of the story is that the timing in business and in markets will never be perfect. In fact, our perfectionism is to blame for keeping cash on the sidelines.

If we looked at markets in 2020, a global pandemic was certainly good reason to stay out. In 2021, supply-chain problems caused a spike in material costs and made it nearly impossible to get a car and many consumer electronics. Russia invaded Ukraine in 2022. About 70% of economists predicted a recession in 2023. And yet, in three of those four years, the U.S. stock market gained ground, which is in line with historical averages.  You will never find a perfect year to put that cash to work. You also shouldn’t blindly invest it.

Below are three scenarios for you to come up with a plan for your cash.

Scenario #1: If you don’t need the money for 10-plus years…

This money should be invested with an asset allocation that you’re comfortable with. I don’t believe you need to get in over a period of time either (dollar cost average). According to data from Ibbotson and J.P.Morgan, there has never been a 10-year period since 1950 with a negative return in a 50% stock/50% fixed income portfolio. If you want to get a sense of the risk you’re comfortable with, you can use our risk tolerance software.

Scenario #2: If you need the money in two to 10 years…

I still believe this money should be invested, but you should invest over a period of time. I typically recommend three to six months of dollar-cost-averaging into the market.

Example: You have $500,000 sitting in cash that you may need within two to 10 years. You invest $100,000 per month in an appropriate asset allocation.

This will mitigate the risk of buying at a high. I had clients who sold a home late in 2021. They will buy another home in 2025. Their numbers were similar to the above example. We dollar-cost-averaged in, in 2022, and therefore bought as the market was dropping. They are now well positioned for their purchase next year.

Scenario #3: If you need the money in less than two years…

Cash or cash equivalents. Even aggressive asset allocations typically don’t take two years to recover from bear markets. However, the Great Depression, dot-com bubble and the Global Financial Crisis are notable exceptions, so it’s better to be conservative. For money you need in less than two years, I would not advise having market exposure, especially in today’s high-rate environment. There are several options yielding 4% to 5% with principal protection.

There is a fourth option here: You don’t need the money or the return. In other words, you have way more than you need, and the return tradeoff is worth the sound sleep. You can check whether you are in this situation by building out a financial plan here.  

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Building wealth can take many forms. Some invest in the stock market, some acquire real estate, and others become successful entrepreneurs. Contrary to what many experts claim, there’s no one right way to do it. 

However, certain mindsets are beneficial as you work toward creating wealth that allows the lifestyle you envision. Currently, there are far more asset varieties outside stocks and bonds, and they’re far more accessible than ever. With the increase in choices, however, strategy is key.

Seek complementary investments

Portfolio diversity is a complicated thing. The number of asset types isn’t nearly as important as the differences between them. 

For example, you might have your investments split fairly evenly between the stock market, cryptocurrency and foreign currencies. On the surface, these might seem like a set of assets diverse enough to weather just about any economic disaster. 

However, all three of those assets are known to be susceptible to volatility. The stock market can be an emotional beast, easily influenced by consumer emotions and politics. Depending on which type of currencies you’re investing in, a war overseas or political unrest can upend your investment values. And when it comes to investment volatility, cryptocurrency is practically the default example. 

Any time the vast majority of your portfolio’s value can be decimated from a single event, you should reconsider the balance. For example, you might be drawn to the prospect of sudden, shooting value gains in cryptocurrency. But with that potential for quick gains also comes high risks. Even the “old standards” of Bitcoin and Ethereum have historically seen alarming dips just in a 24-hour period. A good complementary investment would be unlikely to be negatively impacted by an event that potentially sends cryptocurrency values crashing.

So what assets would protect against cryptocurrency volatility but still increase your wealth over time? There are, of course, bonds and money market accounts. But you can go even further and look into physical assets such as land investment. 

Specifically, farmland investment is often overlooked by mid-tier investors and has a lot of potential advantages compared to housing and commercial real estate. Farmland is far less susceptible to housing bubbles and has seen steady value gains in recent years due to diminishing supply. So with cryptocurrency, there is a high-risk asset with the potential for impressive short-term gains. Paired with something like farmland — more of a stable, long-term asset — your portfolio is more balanced than one with a dozen varieties of similar assets.

That’s not to say that this particular pairing is one I absolutely recommend to everyone and feel all investors should pursue. The most important thing is to make sure all your assets are working toward your wealth goals and not vulnerable to the same dangers.

Reassess with data, not emotion

Being strategic in your asset allocation implies that you have a strategy and that it’s working. You can make and execute a solid plan, but without regular assessment, you might not be making the adjustments you need for maximum growth.

At the beginning of a person’s wealth-building journey, I typically recommend making three separate goal lists. These should include short-term goals of less than three years, medium-term goals of three to 10 years and long-term goals of more than 10 years. Checking in on your short- and medium-term goals is going to help you ascertain if you’re on track to achieve your long-term goals.

For the best strategy adjustments, you should start with a bird’s-eye view and then dig deeper. If you have 10 rental properties, first look to see how your rental income is performing in general. If owning rentals seems to be working well toward your end goal, it’s time to look at individual properties.

If you notice two properties are underperforming, you need to come up with a good reason to keep them. Ideally, this reason should be directly linked to at least one of your three goal categories. If you can’t find a reason, then a change needs to be made. Once you’ve made that asset type as strong as it can be, see how it interacts with the rest of your portfolio.

Using data and a clear set of goals can make it far easier to implement beneficial strategic adjustments that can impact long-term wealth. There are instances where people get emotionally comfortable with one form of asset and don’t acquire a strong allocation mix in their portfolios. Whether you update your goals or not, it’s always worth a look to see if you need to update how you achieve them.

Keep in mind building wealth is a multifaceted journey, with various paths leading to financial success. While there’s no universal formula, adopting strategic mindsets and seeking complementary investments can enhance your portfolio’s resilience.

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Asking a financial planner what the best asset allocation is for retirees is a bit like asking a dietitian what the best diet is for retirees. Ask five professionals and you’re likely to get five different answers, rooted in personal biases and beliefs. So, what’s the real answer? It’s personal and it’s complicated. I’ve got clients who look almost the same on paper but don’t have the same stock-bond breakdown.

Below are five factors that can lead you to something appropriate for your situation.

1. What’s your risk tolerance?

If you’re retired, or close to it, odds are you’ve taken a risk-tolerance assessment at some point in your investing journey. Tools like Schwab Intelligent Portfolios will spit out a model portfolio based on your answers to their questions. While the philosophies and approaches vary, all these questionnaires are trying to determine one thing: How much will you panic when the market drops?

As a fellow human, the unfortunate reality is that we are almost perfectly designed to make bad investment decisions in volatile markets. Our inclination to buy high and sell low is well documented in Vanguard’s Advisor’s Alpha study. Knowing and investing in accordance with your risk tolerance is your first line of defense against those emotional decisions.

Essentially, these tools will give you a risk score, asset allocation or max loss you’d be comfortable with, based on your answers. In my experience, those who are invested way beyond that comfort level are the first to call when things go south.

Risk tolerance shifts over time, and I have seen it shift dramatically once the paychecks stop. Therefore, your portfolio that shifts to more stock over time if you don’t rebalance will likely move further and further from your comfort level.

If you want to see where you stand today, you can use a free version of the same tool we use.

2. What’s your risk capacity?

Risk capacity and risk tolerance are sometimes used interchangeably, but they are not the same. Risk tolerance is based on emotion. Risk capacity is math. It measures how much you can afford to lose. This is a much more common calculation in the institutional money management space.

Take the example of a pension fund. Managers must calculate how much they can afford to lose and still pay plan beneficiaries.

There are situations where risk-takers can find themselves in hot water because, while they are comfortable watching the market get cut in half, their financial plan actually doesn’t mathematically work in that scenario. Retirement is not like your accumulation years, when you can shut your eyes and ignore the pain.

If you are drawing from your portfolio, you should use your financial plan to see how much you can afford to lose before things get dicey.

3. What’s your time horizon?

I never want to be in the business of telling someone that they can’t take their family vacation to Italy because the market is down. The pizza and wine are just too good.

In all seriousness, I do not believe that money for one-time expenses within two years — vacations, car purchases, home improvements, etc. — should be invested in a vehicle with market exposure. The two-year component of that has to do with how long it typically takes to recover from a bear market.

While I do not fully subscribe to “the bucket approach,” I will often allocate based on time horizon; e.g., vacation funds for the next two years will be in cash or a cash equivalent. Money needed in the next two to 10 years will be allocated in alignment with your financial plan, risk capacity and risk tolerance. Money needed 10-plus years out will be invested more aggressively.

For this reason, your Roth IRA and your brokerage account probably shouldn’t have the same asset allocation.

4. What kind of returns do you need?

Like risk capacity, this is just a math problem. You will also find this answer in your financial plan. Everyone would like to spend what they want without having to worry about running out of money, while taking no risk. Very few people can afford to do this.

Your financial plan will have an asset allocation with an assumed rate of return. If you make your portfolio more and more conservative, that assumed return will go down, and at some point, the math will no longer work. If you want to build out your financial plan to see what you need, you can use the free version of our software.

5. What are your legacy goals?

If you are hoping to leave a significant sum to a cause or to your family, you should change your investment allocation. You have now stretched out your time horizon beyond your life expectancy.

The SECURE Act made Roth IRAs even more advantageous as a legacy tool. As a result, we are usually allocating for the next generation within a Roth IRA. While my clients’ overall asset allocations will fall in line with the above factors, it is common to have their Roth accounts be all stock. These are usually the last place we go for money, and they don’t have the annual required minimum distributions (RMDs) that their pre-tax cousins do.

It's important to remember that your asset allocation is simply a tool to help you do the things you want to do in retirement. Allocating too aggressively is like driving 25 mph over the speed limit. You may get to your destination a bit earlier if you’re lucky. You may crash and not get there at all. Allocating too conservatively is like going 10 mph below the speed limit. You may not get to your destination with enough time to actually do something you love.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you’re a fan of Antiques Roadshow, you’ve probably fantasized about discovering that your grandmother’s chafing dish is worth more than your car. But just because an item is old and cherished doesn’t mean it’s valuable. 

Here’s a guide to assessing your collectibles — and to selling or donating the stuff you don’t want to keep.

Assessing your jewelry

If you think your grandmother’s engagement ring or your great-grandfather’s pocket watch is valuable, seek out an appraisal so that you can adequately insure it against loss, theft or damage. If you’re interested in selling the item, hire an accredited appraiser who will research and analyze the market, says Lynn Magnusson, one of the few appraisers in the country to hold accreditations with the American Society of Appraisers, the Appraisers Association of America and the International Society of Appraisers. 

An accredited researcher will assess comparable sales at auctions, jewelry stores and jewelry dealers. Bringing in a third party to vouch for the item’s value in the form of an official appraisal will increase the likelihood you’ll receive a fair price when you sell. 

If you’re primarily looking to insure objects you plan to keep, you’ll want to get the replacement value, which an appraiser can provide by researching the cost of replacing your item with a new one (or a version that’s as close to the item as possible). If you want to donate jewelry to charity and deduct the donation on your tax return, ask the appraiser to provide the item’s fair market value, which is “the price that property would sell for on the open market between a willing buyer and a willing seller, with both having reasonable knowledge of the relevant facts,” according to the IRS. 

You should fact-check an appraisal by reviewing the report and verifying that your appraiser noted any characteristics that could affect the jewelry’s value. If you see any errors, let your appraiser know and ask for a correction. Make sure the appraiser takes the jewelry’s maker into account because that’s the most important characteristic used to determine its value. 

“Similar to artwork, it’s always about the artist,” Magnusson says. For example, buyers will pay a premium for a gold bracelet from Tiffany & Co. as opposed to a gold bracelet from Macy’s. 

The next quality to consider is scarcity. Appraisers will assess the piece’s provenance, or origin, to determine how rare it may be. If the piece is from the collection of a historical figure or celebrity, such as Catherine the Great or Elizabeth Taylor, it could carry significant value. 

Inherent qualities of an object, such as the quality of the metal and stones, will also affect its value. For example, an appraiser will assess the “four Cs’’ of a diamond: carat weight, color grade, clarity grade and cut grade. The Gemological Institute of America, which crafted this method, is the standard resource for jewelry appraisals. Appraisers typically use characteristics developed by the GIA to determine the value of gems and assess the metals. 

Finally, a piece of jewelry should never be worth less than the sum of its parts. A buyer can always scrap the gold or silver and sell it to a refinery or remove the diamonds and sell them to a diamond dealer. You can search for the spot price of precious metals at a website such as www.kitco.com. 

However, keep in mind that the precious metal in jewelry is typically mixed with other elements for color and/or strength, Magnusson says. For example, 14K gold jewelry is made up of 58.3% pure gold and 41.7% alloy. Shop around at jewelry stores and dealers to get the best price.

Assessing your coin collection

Unlike jewelry, which is often subject to wear from use, coins usually maintain their quality over time once they’ve been graded and valued because the grading process typically involves storing them as collector’s items. Institutions such as the Professional Coin Grading Service and Numismatic Guaranty Company grade coins on a scale reflective of their condition. 

These companies will preserve the coin in a plastic case in a process known as slabbing. The cost to have coins slabbed depends on the type of coin and can range from $25 to $300 per coin. If you submit an entire collection for grading, you may be able to get a discount. 

Coin grading institutions will assess a coin’s value based on its rarity. So, for example, a colonial coin (one issued in the British colonies before they became U.S. states), a limited issue coin or an uncirculated coin in mint condition may earn a higher grade than a more common coin in the same condition. You can get a sense of how rare your coins are through the Professional Coin Grading Service’s price guide, which lists prices for all types of American and colonial coins. The Numismatic Guaranty Company also has a price guide for coins from around the world. 

Once you’ve determined the value of your coins, there are a number of marketplaces to turn to if you’d like to sell. “Coins are a very active marketplace,” Magnusson says. You can sell coins to a local dealer or take them to coin shows, such as the American Numismatic Association’s National Money Show or the World’s Fair of Money, where you can shop your collection to different dealers. 

As with any other collection, you can also offer it for sale at online marketplaces such as eBay or Facebook Marketplace. If you choose this route, you’ll need to assume the responsibility of photographing, listing and managing negotiations with potential buyers. If you own a high-value coin or collection, you may want to turn to an auction house, such as Heritage Auctions or Stack’s Bowers Galleries, where you’re more likely to find buyers who can afford big- ticket purchases. 

Assessing your sports memorabilia

Many sports fans have collected jerseys, equipment, stadium seats, trophies and baseball cards. As is the case with other collectibles, condition will play a key role in valuing your sports memorabilia, along with name recognition if the item is associated with a particular athlete or sporting venue. An autographed item may yield a high value as well, depending on who penned it. 

Some items, such as baseball cards, will get the best value at specialized auction houses, says Thomas Ruggie, a certified financial planner based in Orlando and owner of a multimillion-dollar sports memorabilia collection. Baseball cards, like coins, are graded and slabbed, which makes them easier to value and store than some other types of sports memorabilia. 

To authenticate your memorabilia, you’ll generally need to find someone who specializes in the specific type of item, Ruggie says. Look for accreditations such as Professional Sports Authenticator (PSA). Some companies use photo-matching technology to verify that an item belongs to a particular player, team or era in a given sport. If you have photos of the item being used in a game, that should also help in the authentication process. 

Assessing your art

To get a sense of whether you have a high-value piece of artwork, first determine whether it’s a print or an original. If you suspect it’s a print, look for an edition number at the bottom of the piece. Some prints are valuable if the image is desirable, the artist is acclaimed or the edition length is limited. If a print run is small, then its relative rarity enhances its value. 

It can be difficult to tell the difference between a limited-edition print and a reproduction print, says Peter Held, an art appraiser accredited with the American Society of Appraisers. “If you look at the surface closely with a magnifying glass and see a dot matrix pattern, that’s a reproduction print. And generally, those are a lot less valued than an original print made by an artist,” he says. 

If you have an original work, consider its provenance to determine whether it may be a high-value piece. Look for its origin in receipts or other records from the purchase. If you have trouble reading the artist’s signature, try photographing it and using Google Lens — a tool that searches online for images similar to your photo — to help you determine which artist it may be. 

If you suspect your art is valuable, find an accredited art appraiser with appraisal societies such as the ASA, the Appraisers Association of America and the International Society of Appraisers. Once you select an appraiser, you’ll probably be asked to identify the artist and provide documents, such as photographs, receipts and records of exhibits or publications that featured the artwork. Then the appraiser will use auction databases to compare the work with recorded sales. If the artist was represented by a gallery, the appraiser may ask the gallery for comparable sales to come up with a range of values for the work. 

If you want to donate your artwork to a museum, the appraiser will contact the museum curator or registrar, depending on who is handling the donation, to acquire information you’ll need for tax purposes. An appraiser will fill in IRS Form 8283 for non-cash charitable gifts for you to use when filing your tax return so you can deduct the contribution (if you itemize). 

The cost to appraise a work of art ranges from $500 to thousands of dollars, based on the time, type of appraisal needed and complexity of the market for the property, among other things. In addition to assessing value, some appraisers may point you to the best market for sale, whether it’s a gallery, an auction house or a private dealer, says Held. Market research alone with no appraisal may cost less, he says.

Assessing fine china

A complete set of fine china will typically earn you a better price than an incomplete one, but incomplete sets or even single pieces may be worth more than you expect. Many websites sell single pieces of china to buyers who want to replace items that were lost or damaged. If you’re looking to sell a single item or an incomplete collection, check out sites such as Classic Replacements and Replacements Ltd.

Before you accept a selling price, do some research to determine your item’s value. As is the case with most collectibles, consider condition, rarity, quality and maker. Since china is subject to wear and tear, search for cracks, chips and scrapes. Look for a maker’s insignia or a label identifying the material — French porcelain, for example. If the china is from a name-brand maker, research how similar sets or pieces have sold recently on secondary marketplaces, such as Facebook Marketplace and eBay. 

Sometimes certain brands become popular and sell for higher-than-usual retail prices, Magnusson says. For example, Pyrex collections from the mid 20th century that are adorned with kitschy patterns are very popular now. A 1950s Pyrex collection recently sold on eBay for $1,300. 

Rare books and archives

If you have a collectible book or document, an appraiser who specializes in rare books, manuscripts and archives can help you authenticate its value. But the fee to have an appraiser research the value and provide a report could run as high as $2,500, so before you hire one, try to get a sense of what your item or collection is worth by assessing it for any valuable characteristics. 

If you determine that an appraisal is worthwhile, seek out an appraiser who follows the Uniform Standards of Professional Appraisal Practice, says John Henley, a rare books, archives and manuscripts appraiser with the ASA. 

Generally speaking, condition is the most important consideration when valuing these items, Henley says. There are only a few exceptions to this. For example, if you have a Gutenberg Bible that’s in rough condition, you’re still going to get a lot of money for it, he says, because even a damaged Gutenberg is very valuable. Otherwise, if the book’s boards — the rigid flat sheets that form the central component of the book cover — are detached, the pages are soiled or it has fire damage, its value will be significantly diminished. 

Recognition will also influence a book’s value. If there was significant media buzz about the book at one time, that could drive up the value. Scarcity will do the same, but not always, Henley says. Sometimes, an archive or manuscript can have what’s called “discovery” value, meaning there’s something within it that affects our understanding of history. Similarly, a compelling social history can enhance a collectible’s “association” value. 

For example, an appraiser might ask whether a book was the author’s working copy or was given to a close associate or editor. If it was part of a famous collection, that could also increase its association value. For documents, content is king, Henley says. 

If you own a document or archive with objectively interesting or intriguing content, that will increase its value. Content also matters when it comes to documents signed by someone with name recognition. For example, a letter signed by F. Scott Fitzgerald will be more valuable than a hotel registry signed by Fitzgerald, Henley says. 

Protecting your collectibles

Whether you’re starting a collection or preserving one, your high-value items may not be included in a standard homeowners or renters insurance policy. You can get a rider on your policy to cover certain items, but riders won’t always cover the entire replacement value of an item. Another option is a separate insurance policy designed for collectibles. You’ll typically need an appraisal to verify the value of items you want to insure, and annual premiums will be based on a percentage of their value — typically about 1%. 

To shield against damage and loss, store your collectibles safely. Artwork should be protected from exposure to light and dust. Delicate items, such as fine china, may be better suited for display than use. If you’re buying an item for your collection, ask the seller how they recommend preserving your collectible. Cool temperatures and moderate humidity will help preserve your item’s condition. Attics and basements are not typically ideal locations for storing your valuables. 

Passing on collectibles to the next generation

If you plan on leaving your collection to your heirs, make sure they’re interested in taking it on and understand what the assets are worth. Leave them copies of any verification documents, appraisals and photographs, as well as notes on recent sales of comparable items. 

A listing price of a single similar item won’t reflect its selling power as well as an average calculated from recent sales of multiple similar items, so consider keeping a log of recent sales of items that share characteristics with your collectibles. Search for your item on eBay using the advanced search option and filtering for only sold and completed items. 

Diligent estate planning will help your heirs understand how to handle, preserve, insure, sell or donate the items. If you’d like to leave your collection to multiple heirs, obtain an appraisal of the total value of the collection and a breakdown of the cost of individual items so that you can make gifts of equal dollar value, if that’s what you want to do. 

Keep thorough notes on the characteristics that render the items valuable. For example, if you plan to leave your heirs some of your sports memorabilia, indicate whether they are signed or have been used in a famous game. Kovels Antique Trader provides a price guide to a wide range of collectibles and antiques.

Tips for treasure hunters

One man’s trash can be another man’s treasure, but sometimes it’s just another man’s trash. Facebook Marketplace and eBay feature thousands of listings every day, and you never know what you might find from sellers seeking to do some spring cleaning. But verifying an item’s authenticity can prove challenging online. 

Scavenging at estate sales for high-value items may take more time and effort, but you can bring a magnifying glass to search for characteristics that may not be detectable online, such as the clarity of a gem, the resolution of an art print or the condition of a piece of fine china. Negotiate the price if you can. The selling power of collectibles varies with changing market conditions. 

Research recent sale prices of items that are similar to the one that interests you, taking into account whether you plan to resell it or keep it. If you can, get an appraiser on the phone to assess the value. If you can’t manage that, try using tools such as Google Lens to search online for images similar to a photograph of the item, which could help you identify an artist’s signature or a maker’s mark.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Maintaining a stable and secure income is an essential financial priority for retirees. Risks such as inflation, stock market fluctuations and unexpected expenses can pose threats to retirement security and cause sleepless nights. Fortunately, retirees and people approaching retirement can take steps to help ensure their retirement income remains secure.

One essential component of retirement security: strategic consideration of investments.

While investing is a complex topic and can be intimidating, there are steps just about everybody can take to manage their investments. Once the following steps are taken, making asset allocation decisions for how you divide your money between stocks, bonds and/or cash in a way that balances returns and safety according to your comfort and needs becomes easier. Asset allocation is one of the most important investment decisions.

Step #1: Determine the character of your income.

You should take into account income from both your employment and other sources. And “character” refers to how steady and secure your income may be. Income that is uncertain or volatile might call for a lower-risk investment portfolio, and a more secure, steady income might be able to withstand a riskier portfolio that offers higher potential returns.

Step #2: Assess your risk tolerance.

Once you’ve figured out your income’s character, you should take stock of how tolerant you are of the potential ups and downs of investment returns. For instance, oftentimes, portfolios with a greater chance of high returns in the long run experience more ups and downs from year to year, and higher returns are not guaranteed.

You should be honest with yourself about your tolerance for potential volatility and the accompanying risk.

Step #3: Consider your risk capacity and your risk tolerance together.

Risk capacity refers to how well your finances can bear risk. If you have a high tolerance for risk, but your income and other financial resources wouldn’t be able to recover adequately if the market takes a downturn, you’ll need to carefully balance your need to stay financially secure and your preference for risk-taking.

Step #4: Decide how to allocate your funds.

Allocation of funds means figuring out where to put them, usually in stocks, bonds and/or cash. For example, if you want to potentially earn more, and both you and your funds can withstand greater risk, you might choose to have more stocks than bonds in your portfolio.

On the other hand, if you want to avoid as much risk as possible and are willing to earn less on your investments, make sure your portfolio has more bonds. Savvy investors make allocation decisions before thinking about specific investments.

Asset classes are the building blocks of asset allocation. There are three basic classes: stocks, bonds and cash. Below is a summary of the asset classes:

As listed in the table above, each asset class poses its own risk. Investment risks tend to fit into these categories:

• Inflation. This refers to a decline in a currency’s purchasing power.
• Interest rate fluctuations. Interest rates change in response to economic conditions, and these affect bond prices. For instance, generally, when interest rates rise, bond prices fall.
• Stock market volatility. If investors expect a good economy in the near future, the stock market tends to rise. On the other hand, if investors feel wary or negative about the economy’s prospects, the stock market tends to fall.
• Individual companies’ stocks. Good news about a company can make its stock price go up faster than the rest of the stock market, while bad news can do the opposite.
• Currency risks. Currencies from different countries and regions fluctuate in relation to one another and can impact the U.S. dollar’s purchasing power.

Diversification — dividing investment funds between a variety of stocks and/or bonds — is a good strategy to reduce risk. Diversification won’t eliminate risks, however. If the stock market drops, a diversified portfolio will likely drop, too.

Step #5: Choose how to implement your asset allocation decisions.

You can choose to make your investment decisions a reality by using a pre-packaged method, a customized solution or a combination of these approaches.

Mutual funds and exchange-traded funds (ETFs) pool investors’ money in stocks, bonds and other assets. Both are pre-packaged solutions and managed by professional fund managers.

A customized or self-directed approach enables you to design your own asset allocation strategy, choosing among several mutual funds, ETFs, bonds, government Treasury bonds and notes, real estate or individual securities, to create a portfolio aligned with your preferences.

A financial plan provides a good framework to help you choose your asset allocation target by quantifying a spending plan and setting savings and investment return targets. It can also help you see the potential impact of investment risks, expenses and tax implications.

When taking the self-directed approach, you’ll need to choose specific investments once you’ve decided on an asset allocation target. Below are a few things to consider:

• Active vs passive mutual funds. Active mutual funds are actively managed by a portfolio manager, usually to achieve returns higher than the market average (though this isn’t guaranteed). These funds tend to have higher costs due to the activities performed by the fund manager. Passive mutual funds (such as indexed mutual funds and ETFs) typically mirror the structure and performance of a specific market index, such as Standard & Poor’s 500 index. These funds tend to have lower costs.
• The impact of investment costs on potential returns and tax implications.

You don’t have to be completely on your own if you decide on the customized or self-directed approach to asset allocation. A financial adviser can help you design and implement your investment mix.

Find out more about asset allocation and learn practical considerations and advice on related topics from retirement professionals in the Society Of Actuaries Research Institute’s Asset Allocation: A Roadmap to Investing and other briefs located at Managing Retirement Decisions.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

On July 10, 2023, I walked out of my old office for the last time. Upon my departure, I gave up a lot of my identity. I spent eight years with the firm and was one of four owners. I lost some relationships. No, I didn’t lose friends or leave on bad terms, but I walked away from the thing that connected us and the daily social interaction it facilitated. I said goodbye to the daily structure.

And, oh yeah, I gave up a nice paycheck. No matter how much money you have in the bank, how well prepared you may be, that’s scary. And while I wasn’t retiring, almost every retiree faces these same challenges.

Below are a few strategies to help you sleep better at night in your first few years of retirement.

1. Retire “to” not “from.”

I drove from my old office to my new one. I didn’t stop at home. I didn’t stop for coffee. I don’t even think I listened to the radio. And I wouldn’t advise this. I encourage my clients to take some time to breathe. Do the home projects you’ve been putting off for 30 years. Spend time with your grandkids. Take that trip.

When I arrived at my new office, I had my new identity, much the same as my old. Professionally, I am a financial planner, an owner and an entrepreneur. The gig economy has made it much easier to work when you want, how you want, in the industry you are passionate about. The most important thing about retiring “to” something is that you know who you are. Remember: “Retired” says only what you don’t do. Make sure you know what you do do.

Now, I know you’re asking, “How does this make things less scary?” Two reasons. First, being busy inherently reduces stress. Second, many of the things that people retire to pay something. Probably not what you’re used to, but they take stress off your portfolio, and your shoulders, between retirement and Social Security.

2. Cash is king.

Not in an investment sense and not forever. I often encourage retirees to have a year’s worth of expected expenses in the bank, including any one-time, big-ticket items. That’s much more than the three to six months you’d read about in a personal finance textbook.

It’s really uncomfortable to watch your checking account deplete without the bi-weekly refills. One strategy that may help is to hold that year’s worth of expenses in a savings or money market account that deposits the exact amount of your old paycheck into your checking account every two weeks.

3. Have a financial plan.

Think of your financial plan as your gas gauge. It will tell you how far you can go without running out. Ideally, you have many more miles than you plan to drive. A proper financial plan will also address cash flow, risk management, investments and estate and tax planning.

However, the core thing you want your financial plan to tell you is this: “You’re going to be OK.” That will certainly help you sleep at night.

If you want reaffirmation of your plan, you can check your numbers for free here.

4. Have an appropriate asset allocation.

Your investments are the actual gas in the tank. Cerulli Associates and other financial firms have long documented the difference between “investment” returns and “investor” returns. The latter typically are much lower than the former because we are human beings. We buy at highs and sell at lows. Vanguard’s Advisor’s Alpha study highlighted behavioral coaching as the most valuable service financial advisers provide.

Much of this panic selling is due to having a portfolio that made much more sense in your 30s than it does in your 60s. Weekly, I come across Baby Boomers who have more risk in their portfolio than I do. I am 37. A subsequent article will serve as a guide to find your appropriate asset allocation. In the meantime, you can use this free tool to gauge how much risk you’re comfortable with.

5. Have an income plan.

Throughout your working career, if you’re an employee, you have an income plan. It’s your paycheck, and it’s probably as steady as your job. In the last 15 years, I can count on my two hands the number of pre-retirees who have an income plan for the next chapter.

The financial plan tells you how much you can spend every year. The income plan tells you where it’s going to come from every month. When I started my own firm, I knew that I had two years of runway, literally making no money, before I would run out. My financial plan told me that. Where I would draw excess money for expenses was part of my income plan. Fortunately, things ramped up quickly, and there were only a few months where this was necessary, but the fact that I had a plan meant I could sleep soundly.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Even though you may be a high-net-worth individual, you are still capable of making mistakes in retirement. But these mistakes may be different now that you have more disposable funds.

Below are five common mistakes that I have noticed high-net-worth individuals make in retirement:

1. Not changing asset allocation to meet your needs and goals.

As your estate gets larger, it is important to understand what your goals are and how those may have changed. Are you investing for yourself and your own needs? Are you investing with future generations in mind? Is your goal to add to your net worth or to simply protect what you have?

Additionally, as your net worth increases, more investment options become available to you. You have access to certain alternative investments and funds that are available only to high-net-worth individuals.

It is important to find a trusted adviser to help guide you through these types of questions and to assist you in the construction of a portfolio that meets your needs and goals and continues to work with you as your goals change over time.

2. Failing to update estate documents to reflect current net worth and concerns.

As your net worth grows, your estate plan and documents should be modified to reflect that net worth. With the sunset provisions of the 2017 Tax Cuts and Jobs Act in sight, it is a reminder that your estate plans should be reviewed periodically.

If you have an estate that exceeds $25 million, you may want to speak with your adviser and attorney about what strategies you should be implementing before the estate tax is cut in half.

And as your estate grows, there are more concerns you may have or loftier goals that you want to accomplish with your estate plan. If you fail to update your estate documents to reflect your current net worth and goals, you may not be taking advantage of some tax-saving strategies.

Estate plans, like financial plans, are not something that you dip in bronze and put on a bookshelf. They are malleable and change as your life changes.

3. Underestimating health care costs.

With the recent rise in inflation, it’s hard to confidently predict how much items will cost in the future. If you are in your 60s, you may not be considering what the cost of health care will be when you’re 80, but it is a serious concern that needs to be evaluated. If you want to purchase an independent living space with graduated assistance options, the cost 20 years from now will be nothing like what it is today.

Maybe you are relying on long-term care (LTC) insurance to help fund those future costs. With LTC insurance becoming costlier, and with it being difficult to even qualify to use the insurance, people are relying more on the idea of self-insuring. But how much do you actually need?

It is important to understand what you want your retirement to look like and to start doing your research early and understand the costs. Then, you can put an inflation adjustment rider on those costs to get a good sense of what they may be.

If you underestimate those costs, your future may look different than what you expect. The funds you want to leave for your family may not be around. Your large estate may be susceptible to claims from health care providers seeking payment. It is important to understand these costs and plan accordingly.

4. Not having proper conversations with your family about your wishes.

It can be difficult to have conversations with your family about the end of your life and your concerns — but it can also be very rewarding. There is a fine line between spoiling your children and educating them about money and supporting their goals.

Education around smart investing and savings can pay dividends in the future and help set your children up for success. Education around your estate plan and explaining to them why you set up trusts can also be a good bonding moment vs a shock when you are dealing with the estate.

I had one client who, when he passed, had not had any meaningful conversations with his family about his estate. There was a lot of animosity toward him, even after his death, because of how the estate was structured and what was perceived to be unfair.

5. Not updating your insurance to reflect your current needs.

When you were a young family just starting off, you may have purchased life insurance to cover the cost of your kids’ expenses if something should happen to you before they were out of the house. Now, your children are older, and your net worth has grown. Do you still need that life insurance that is charging you a premium?

Perhaps you should ask two questions: Why did we originally purchase life insurance, and is there still a need?

It is OK to cash in on insurance policies that are no longer necessary or no longer serve a purpose. The opposite may be the case for your umbrella insurance. As your net worth gets larger, you want to make sure you are covering your risk if something should happen, so increasing your umbrella insurance might be a prudent plan.

The key thing to remember is that as life progresses, your financial plan should change to reflect your new goals and concerns. Have trusted advisers around you to guide you through what changes you may need to make and to educate you on the conversations you may want to have with your family.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Making the decision to retire is not an easy one, and market volatility and persistent inflation make it an even tougher call to make. A key anxiety is not having enough money to last throughout one’s lifetime.

Confidence in having enough money to live comfortably in retirement took a hit in 2023, according to the Employee Benefit Research Institute (EBRI), and while it somewhat bounced back, confidence still is not as high as in previous years. Inflation is the top financial concern for Americans, according to Northwestern Mutual's 2025 Planning & Progress Study, and, per the EBRI report, people are concerned about the "government making changes to the American retirement system."

When those thoughts are paired with a volatile market, it can create a scary situation for people near retirement. After all, a 401(k) is only as good as what it's invested in.

What it means to retire in a down market

Retiring under volatile macroeconomic conditions — as you switch from income accumulation to distribution — means you would start cashing out of your investments at a time when the broader market is down.

If you already have a set budget for retirement, a down market could mean you’d be tempted to sell more investments to raise the same amount of money to live on. But cashing out more securities than expected also means you could have a smaller retirement fund for the future.

There are ways to mitigate these risks with a little flexibility and patience. Remember that acting wisely now with your finances can mean a wealth of difference to your quality of life in the future.

"As pre-retirees and retirees assess their portfolios, it’s crucial to stay the course.  Staying the course means not letting the current market environment influence investors into short-term, reactionary portfolio decisions — these most often lead to investor mistakes," said Matt Fleming, senior wealth adviser at Vanguard.

"It is also important to re-evaluate one’s goals, objectives, risk tolerance and how those align with the investing environment," he added. "Stocks historically are about three times as volatile as bonds. With expected returns for stocks and bonds, over the next decade, in close proximity to each other, some investors may wish to moderate their equity targets. Any changes to one’s target allocation should be done with a longer-term perspective."

You might be tempted to consider securities such as annuities to get a regular income, but remember that you might end up paying steep fees for annuities or face restrictions for the privilege. “There’s no free lunch there,” he said.

Here are some strategies to navigate retiring in a volatile market:

1. Take stock of your finances: Figure out what your retirement lifestyle will look like, both what you aspire to have and what is realistic. Draw up a budget with discretionary and necessary expenses so you will have a clear idea of where you can be more flexible if needed.

2. Make sure your portfolio is properly allocated: The classic allocation is 60% stocks and 40% bonds, but it can be further fine-tuned depending on your tax situation and other circumstances. Fleming said 90% of an investor’s return is determined by the stock, bond and cash allocation.

3. Be prepared emotionally to enter retirement, especially in a volatile market: The shift from spending your paycheck to withdrawing funds from a portfolio that's fluctuating in value can be unnerving. Honestly ask yourself how you would feel if your portfolio dropped by 30% — and have a plan for this scenario. Many investors get emotional during volatile markets and make poor investment decisions.

4. Adopt a flexible withdrawal rate that adjusts with the market: Instead of sticking to the 4% retirement rule whether your portfolio rises or drops, set a floor and ceiling on what you will take out. If the market is up 20%, that 4% withdrawal will bring in more cash than what you had budgeted, so set a dollar ceiling on what you will withdraw. If the market falls, set a similar floor, so you will not have to withdraw more than 4% on a smaller base to match your budget.

5. Tap your interest and dividend payouts from taxable accounts first instead of the principal: You have to pay taxes on them anyway, so spending these monies first will not incur additional taxes. Next, consider selling long-term investments assessed at the lower capital gains tax rates of 0%, 15% and 20% instead of ordinary income. If you have to, withdrawing from a Roth account offers tax-free income.

6. Delay your retirement or work part-time: If you are willing and healthy enough to keep working, consider postponing your retirement until market conditions improve. If you do not want to or are unable to work full-time, consider a part-time job or phased retirement that can fill an income gap.

7. Consider renting out a room in your home: Many people today turn their home into a money-making machine by renting out a room on Airbnb or similar platforms. Today’s technologies make it easy to monetize your home and check out the guests who would be renting from you. The platform also makes it easy to market your property, find guests, collect money and resolve disputes.

8. Delay applying for Social Security benefits to maximize your payout: You can start receiving Social Security at age 62, but this means you will get the lowest payout. The longer you wait before taking Social Security benefits, the bigger your check. The largest payout comes if you file for benefits at age 70.

9. Think about housing: Consider a reverse mortgage, downsizing to a smaller home or even relocating to a less expensive and tax-friendly state. Vanguard research has found that home equity can help with retirement readiness if a homeowner relocates to a less expensive housing market. The outcome varies based on location, appreciation and tax implications, but the strategy can potentially unlock about $100,000 of home equity.

10. Work with a financial adviser: “With volatile markets, investors may really struggle to stick with a plan,” Fleming said. “What we know by the data is that investors who don’t partner with an adviser typically have worse performance. One of the biggest factors is behavioral, where investors impact their returns by making bad decisions.”

Finally, remember to focus on the long-term. 

While there are some adjustments to be made in the short run, a little flexibility can go a long way to ensuring peace of mind about your retirement savings once the market recovers.

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It used to be that investors asked themselves the question, “How many mutual funds should I have in my portfolio?” They still ask the same question of diversification, but more in terms of exchange-traded funds (ETFs).

A portfolio of just two ETFs might be perfect for the do-it-yourself investor who has no interest in researching the ins and outs of 100 different funds. However, it might not be ideal for the person who has millions of dollars to invest and loves reading ETF fact sheets. Everyone is different.

Famed mutual fund portfolio manager Peter Lynch coined the term “diworsifcation” while discussing how companies expand into businesses they know very little about, ultimately hurting the core business in the process. But you can achieve something similar by stockpiling too many ETFs, as the typical fund has hundreds of securities, leading to overlapping positions of individual stocks.

David Swensen, the chief investment officer of Yale University’s endowment fund since 1985 and arguably one of the best investment managers in American history, has a model portfolio that includes six different asset classes: Domestic equities (30% weighting), International equities (15%), emerging markets (10%), Treasury inflation-protected securities (TIPS) (15%), U.S. Treasuries (15%) and REITs (15%).

We’ll stay close to that model with this diverse but concise list of 10 ETFs to buy, including six equity ETFs, two fixed-income ETFs and two alternative asset ETFs.

Data is as of Aug. 29, 2018. Click on ticker-symbol links in each slide for current share prices and more.

It used to be that investors asked themselves the question, “How many mutual funds should I have in my portfolio?” They still ask the same question of diversification, but more in terms of exchange-traded funds (ETFs).

A portfolio of just two ETFs might be perfect for the do-it-yourself investor who has no interest in researching the ins and outs of 100 different funds. However, it might not be ideal for the person who has millions of dollars to invest and loves reading ETF fact sheets. Everyone is different.

Famed mutual fund portfolio manager Peter Lynch coined the term “diworsifcation” while discussing how companies expand into businesses they know very little about, ultimately hurting the core business in the process. But you can achieve something similar by stockpiling too many ETFs, as the typical fund has hundreds of securities, leading to overlapping positions of individual stocks.

David Swensen, the chief investment officer of Yale University’s endowment fund since 1985 and arguably one of the best investment managers in American history, has a model portfolio that includes six different asset classes: Domestic equities (30% weighting), International equities (15%), emerging markets (10%), Treasury inflation-protected securities (TIPS) (15%), U.S. Treasuries (15%) and REITs (15%).

We’ll stay close to that model with this diverse but concise list of 10 ETFs to buy, including six equity ETFs, two fixed-income ETFs and two alternative asset ETFs.

Data is as of Aug. 29, 2018. Click on ticker-symbol links in each slide for current share prices and more.

• Type: Domestic equity large cap
• Allocation: 15%
• Market value: $161 billion
• Expense ratio: 0.04%

Warren Buffett believes that most investors should own a plain vanilla S&P 500 index fund along with a small amount, say 10%, of short-term government bonds. That plan is easy for anyone to implement.

“The trick is not to pick the right company,” Buffett said earlier this year. “The trick is to essentially buy all the big companies through the S&P 500 and to do it consistently.”

The iShares Core S&P 500 ETF (IVV, $293.54) — the second-biggest S&P 500 ETF by assets under management behind only the SPDR S&P 500 ETF (SPY), the biggest U.S.-listed ETF — gets the nod solely because it’s cheaper by 5 basis points at 0.04% annually.

Sure, the SPY has smaller bid-ask spreads than IVV, which is nice for trading. But someone who simply sits in all 10 of these ETFs likely won’t be doing much trading, so those spreads are immaterial to the task of building a diversified portfolio.

This Kiplinger ETF 20 pick simply tracks the S&P 500, which means it holds 500 blue-chip companies including the likes of Apple (AAPL), Alphabet (GOOGL) and Exxon Mobil (XOM).

• Type: Domestic equity mid-cap
• Allocation: 7.5%
• Market value: $25.8 million
• Expense ratio: 0.25%*

The Invesco Russell MidCap Equal Weight ETF (EQWM, $51.64) isn’t a very popular fund, with less than $26 million in assets under management. Nonetheless, this equal-weight fund could turn out to be the surprise winner of this ETF buy list over the long haul.

With EQWM, you enjoy the advantages of mid-cap stocks – they’re the largest segment of the U.S. stock universe, they deliver higher risk-adjusted returns than either small- or large-cap stocks, and they represent growing but financially stable businesses. You also add an equal-weighting methodology, where all the stocks represented have an equal ability to contribute to the fund’s performance. Thus, a small allocation should provide the extra juice needed to grow your investments by more than the overall markets.

EQWN’s top 10 holdings include Church & Dwight (CHD, $56.33) – the company behind Arm & Hammer, OxiClean and Trojan brands, and one of the most consistent performers among all U.S. stocks – Concho Resources (CXO) and Sprouts Farmers Market (SFM).

*Includes a 0.43% fee waiver through at least Aug. 31, 2018

• Type: Domestic equity small-cap
• Allocation: 7.5%
• Market value: $8.8 billion
• Expense ratio: 0.05%

Buying a low-cost ETF like the Schwab U.S. Small-Cap ETF (SCHA, $78.18) is an inexpensive way to capture the small-cap portion of the Dow Jones U.S. Total Stock Market Index, which tracks the performance of the entire U.S. stock market.

The small-cap portion gathers 1,774 stocks – the 751st largest by market cap through the 2,500th – giving investors a diversified selection of companies. The top three sectors by weight are financials at 17.7%, information technology (16.9%), and healthcare at 14.3%.

Not every holding is a true small-cap stock by definition: The weighted average market cap if $3.4 billion, whereas small caps typically are defined as being between $300 million and $2 billion. So SCHA really is giving what some would call a “smid-cap” fund.

Like EQWM, SCHA is intended to give your portfolio a little pop without overexposing it to riskier and more volatile stocks.

• Type: International equity large-cap
• Allocation: 10%
• Market value: $71.2 billion
• Expense ratio: 0.07%

Every properly constructed ETF portfolio ought to have some equity holdings outside the U.S. That’s to avoid home-country bias. JPMorgan Asset Management suggests U.S. investors have 75% of their investments in U.S.-based assets despite the fact the U.S. accounts for a little more than 35% of the world’s stock markets — a condition most of the world’s investors fall victim to from time to time, doing a big disservice to their portfolios.

Vanguard has a reputation for doing things on the cheap. For 7 pennies on the dollar, you can own Vanguard FTSE Developed Markets ETF (VEA, $43.78), which gives you exposure to almost 4,000 stocks from around the world, all outside the U.S. By doing this you are not only diversifying your overall portfolio but you’re also reducing both geographic and company risk.

VEA’s holdings are concentrated in developed markets, such as Japan, Canada and western European countries. It’s also heavily large-cap in nature, featuring well-known blue chips such as Royal Dutch Shell (RDS.B), Nestle (NSRGY) and Toyota (TM).

• Type: International equity small- and mid-cap
• Allocation: 5%
• Market value: $226.3 million
• Expense ratio: 0.49%

Usually, 0.49% would be expensive for a passive investment, but given it’s for just 5% of the overall portfolio, it may make sense to pay it to gain exposure to the lesser-traveled world of international small- and mid-cap markets.

Everything in moderation, right?

Unlike cap-weighted ETFs, the Invesco FTSE RAFI Developed Markets ex-U.S. Small-Mid ETF (PDN, $32.97) is RAFI-weighted — RAFI stands for Research Affiliates Fundamental Indexation — which means it uses four fundamental measures of a company’s size: book value, cash flow, sales and dividends, to weight each of the 1,504 holdings.

Proponents of RAFI like this type of weighting because it tends to tilt toward companies that are more profitable and avoids those that are overpriced providing investors with a better value proposition.

That said, you’ve likely next heard of many of the stocks in PDN’s top 10 holdings, such as Norwegian oil-and-gas surveying services company TGS NOPEC Geophysical Co. or Canadian transportation company TFI International.

• Type: Emerging-markets equity large-cap
• Allocation: 10%
• Market value: $60.6 billion
• Expense ratio: 0.14%

The Vanguard FTSE Emerging Markets ETF (VWO, $42.90), which invests in emerging markets such as China, India and Brazil, has had a rough go of it in 2018, off a little more than 10% year-to-date. That’s significantly worse than the 8% gains of the S&P 500.

Two words explain the difference: emerging markets. These faster-growing but less stable economies have acted terribly in 2018, and some experts suggest American stocks will pummel EMs for the foreseeable future.

JPMorgan wrote in July that all the bad news and trade angst emanating from overseas was baked into stock prices, and recommended that investors increase their exposure to emerging markets.

A well-constructed portfolio is like a sports team in that there’s always going to be players underperforming, overperforming and performing as expected. Having a little of everything ensures you do well in good times and bad. That’s another way of saying that emerging markets will have their day again.

• Type: U.S. fixed income, inflation-protected
• Allocation: 15%
• Market value: $23.9 billion
• Expense ratio: 0.2%

Treasury Inflation Protected Securities (TIPS) aren’t the most exciting investment. But when inflation starts to rear its ugly head – as is the case heading into the final months of 2018 – you want an investment like the iShares TIPS Bond ETF (TIP, $112.12) that provides inflation protection and a guaranteed real return for a portion of your portfolio. Especially if you’re over the age of 50.

In July, core inflation was up 2.9% over the past 12 months – the largest gain in the past decade and a sign that inflation is not slowing. While the economy remains strong, pension funds are starting to contemplate when the bubble will burst.

“The U.S. has been well supported by economic growth,” Canada Pension Plan Investment Board CEO Mark Machin recently said. “It has driven earnings growth. The fundamentals in the U.S. are still incredibly strong, and the question now is: How long can that go on?”

• Type: U.S. fixed income
• Allocation: 15%
• Market value: $15.3 billion
• Expense ratio: 0.15%

If you thought TIP wasn’t scintillating, you’d definitely have problems with the iShares Short Treasury Bond ETF (SHV, $110.44), which invests in short-term U.S. Treasuries of one year or less. Currently, it has 59.5% invested in U.S. Treasuries and the rest in cash and derivatives, yielding a miserly 1.2%, below the current rate of inflation.

So, why is SHV good for your portfolio?

If you remember the intro, we’re trying to follow the model portfolio of one of this country’s brightest investors, David Swensen. Also remember Uncle Warren’s advice that the average investor needs only two funds: an S&P 500 tracker and something for short-term bonds.

The asset allocation recommendations of these two investment gurus are meant to include assets that aren’t correlated to each other to help smooth out long-term returns. Sure, you’re not going to hit a home run with SHV, but you’ll probably not regret owning it when the markets get a little choppy.

Good defense wins championships.

• Type: Alternatives (U.S. real estate)
• Allocation: 7.5%
• Market value: $2.8 billion
• Expense ratio: 0.13%

Real estate is the newest S&P 500 sector – and it’s an asset class that ought to be in any diversified portfolio, especially if you don’t actually own a home or other property.

The Real Estate Select Sector SPDR (XLRE, $33.90) seeks to track the performance of all the real estate investment trusts (REITs) in the S&P 500. Currently, there are 33 holdings in XLRE, with the top 10 accounting for 55% of the portfolio’s weighting.

The largest holding at the moment is telecom-infrastructure play American Tower (AMT) at 9.9%, followed closely by mall operator Simon Property Group (SPG) at 8.4%. With retail coming back to life, SPG could overtake American Tower in no time.

XLRE has struggled this year, gaining just 3% year-to-date. Rising interest rates have had a dampening effect on real estate investors. But a more-than-3% yield adds to the total returns … and should provide a little investor protection until real estate rotates back into investors’ favor.

• Type: Alternatives
• Allocation: 7.5%
• Market value: $611.4 million
• Expense ratio: 0.77%

The IQ Merger Arbitrage ETF (MNA, $31.56) was launched in November 2009. It tracks the performance of the IQ Merger Arbitrage Index, an index that seeks to benefit from corporate mergers by owning takeover targets, while also hedging via some short exposure.

Global mergers and acquisitions hit a 17-year high in the first quarter of 2018 providing the index with many potential opportunities. More importantly, merger arbitrage situations rarely are affected by market environments, so it all comes down to whether the buyer has done enough homework on the acquisition target to bring the deal home.

Of all the ETFs available in the alternatives category, MNA might seem like a head-scratcher, especially given its management expense ratio of 0.77%.

The key here is stable returns.

Since its launch, MNA has had two years of negative total returns (2010, 2011) and six years with positive total returns (not including 2018). The down years averaged -1.2%; the up years 4.4%. It’s not flashy, but it does make MNA an excellent place to park your money.

While speaking with a new client the other day, I praised a favorite fund for its superior long-term record. Noting that she plans to retire in a few years, she said: “My long term isn’t that long anymore. I can’t afford another bear market like the last one.”

Good point. If you’re nearing retirement or have already retired, you should put a healthy slug of your investments in bond funds—typically about 40% of your assets.

In addition, you need to choose your stock funds with care. Standard & Poor’s 500-stock index plunged 55.3% during the 2007-09 bear market, the worst downturn since the Great Depression. I don’t expect the next one to be nearly as painful, but investors, especially those who are no longer collecting paychecks, need to keep a sharp eye on risk.

In choosing the funds for this article, I’ve limited myself to ones that I expect to perform well in bear markets compared with their peers. I’ve also insisted on low expense ratios, managers who invest heavily in their funds, and solid risk-adjusted returns (that is, taking volatility into account). All those factors have proved helpful in identifying funds that will produce future market-beating returns.

Below are my six best stock funds for 2017. I’ll write about exchange-traded stock and bond funds and bond mutual funds in the coming weeks. (All returns are through November 21 unless otherwise indicated.)

Talk about low risk. Although American Funds American Mutual F1 (symbol AMFFX) tends to lag in powerful bull markets, it has beaten the S&P 500 in all 14 stock market declines of 15% or more since its inception in 1950. Most recently, when the S&P tumbled 10.3% from December 30, 2015, through February 11, the fund lost just 6.7%. Over the past 10 years, the fund’s 6.6% annualized return almost exactly matches the return of the S&P—but with a much smoother ride.

The fund’s six managers hunt for undervalued large companies that pay steady dividends. But the managers focus on dividend growers, not riskier, high-yielding stocks. Just 5% of assets are in stocks that don’t pay dividends. With annual expenses of just 0.66%, this is a perfect middle-of-the-road fund for retirees. Note: To avoid paying a sales charge, buy American Mutual (as well as other American funds) through the Fidelity or Schwab online brokerages .

Vanguard Primecap (VPMCX) may be the nation’s best growth-stock mutual fund. A $10,000 investment in Primecap 31 years ago would be worth more than $450,000 today—more than double what you would have earned in an index fund that tracks the S&P 500.

Primecap Odyssey Stock (POSKX), one of two Primecap funds still open to new investors, is similar to the relatively conservative Vanguard fund, which is closed to new investors. Over the past 10 years, Odyssey Stock returned an annualized 8.0%—an average of 1.2 percentage points per year better than the S&P. Annual expenses are 0.65%.

The fund mixes well in a portfolio with American Mutual. While American Mutual emphasizes dividends and value, Odyssey Stock owns more fast-growing companies. More than half of the Primecap fund’s assets are invested in technology and health care.

American Funds New Perspective (NPFFX) is the perfect choice for investors who want to dip a toe into foreign stocks but don’t want a pure international fund. A global fund, New Perspectives at last report had roughly half of its assets in U.S. stocks and half in foreign stocks. But over the past three decades, its stake in U.S. stocks has varied from more than 50% to less than 25%, depending upon where the fund’s managers see the best opportunities. As is the case with all American funds, each of New Perspective’s seven managers is responsible for his or her own slice of the portfolio.

The fund’s record is exceptional. It has beaten the average global stock fund in nine of the past 10 years. Over that period, it has outperformed the MSCI All-Country World index by an average of 4.8 percentage points per year. Yet it has been slightly less volatile than the index. The fund has a strong tilt toward growth stocks—at last word, nearly one-fourth of the fund’s assets were in shares of technology companies.

A good stock portfolio should be well diversified. It should hold both U.S. and foreign stocks, and within those broad groups it should own shares of large companies and stocks of smaller companies. Stocks of midsize companies—mid caps, for short—offer most, if not all, of the benefits of small-cap stocks but with less volatility. That translates into smaller losses in turbulent markets.

Parnassus Mid Cap (PARMX) invests in companies with market capitalizations of $3 billion to $20 billion. Lead manager Matthew Gershuny and comanager Lori Keith search for growing businesses that they think can increase their intrinsic value, or true worth, by at least high-single-digit percentages annually over the next three years. Over the past 10 years, the fund has returned an annualized 8.8%—almost precisely matching the return of the S&P MidCap 400 index, but with 15% less volatility. The fund bills itself as socially responsible, investing only in companies it believes behave ethically and avoiding weapons makers and tobacco companies, among others.

I don’t usually like sector funds, but health care, in my opinion, has such huge tailwinds that I make an exception for it. Consider: The baby boomers are aging, expanding middle-class populations in developing countries are demanding better health care, and scientific breakthroughs are occurring at a rapid clip. Even so, you don’t want to overdo any sector bets, which is why Vanguard Health Care (VGHCX), the pick in this category, should get the smallest allocation of the six funds listed here.

Health Care benefits from a low, 0.36% expense ratio, plus a skilled manager and analysts from Wellington Management, which runs the fund for Vanguard. The fund’s long-term record is superb, having returned an annualized 10.7% over the past 10 years—an average of 3.8 percentage points per year more than the S&P 500. Yet stocks in the health care sector don’t look expensive compared with the index—especially when you consider that as a group, they have lost ground so far this year.

I’ve saved the riskiest fund for last. American Funds New World (NWFFX) invests roughly half of its assets in stocks of emerging markets and the remainder in multinational companies based in the developed world, including the U.S., that do a substantial amount of business in developing nations. Emerging markets are statistically cheap, even after a nice rally this year that hit a speed bump with the resurgence of the dollar and the election of Donald Trump, who has pledged to renegotiate many U.S. trade deals. I’d still invest in New World, but I wouldn’t go overboard.

As far as how you should allocate money among these funds, I’d say put 30% of your stock money in American Mutual, 25% in Primecap Odyssey, 20% in New Perspective, 10% in New World, 10% in Parnassus Mid Cap and 5% in Vanguard Health Care.

Steve Goldberg is an investment adviser in the Washington, D.C., area.

Fund managers wage war against the markets every day, trying to pick stocks or bonds that will push them past their benchmark bogeys. More often than not, the markets win. But investors don’t have to lose out, too. They can choose to invest in exchange-traded funds instead. Broad ETFs can capture nearly all of a market’s returns by passively tracking a benchmark, such as Standard & Poor’s 500-stock index.

Expense ratios are rock bottom — in fact, some firms are flirting with none at all (there are some catches.)

Yet with more than 2,000 ETFs now on offer, picking a few good ones can be daunting. More than a dozen funds track versions of the S&P 500 alone. Plus, scores of ETFs aim to beat the markets by carving out certain types of stocks or bonds, or by emphasizing things such as share-price momentum—anything to give them an edge over traditional indexes.

Whatever your goals, the portfolios below can serve as the bedrock of your investment program for years. Each basket features a broad mix of common stocks and bonds, all drawn from the Kiplinger ETF 20.

Maximum growth

Fewer stocks, more yield

Playing it safe(r)

Keeping It Simple