In the 1948 comedy Mr. Blandings Builds his Dream House, Cary Grant and Myrna Loy encounter numerous setbacks and unexpected expenses as they play a hapless married couple overseeing construction of their new home.
Financial professionals often use house construction as a metaphor for building your investment portfolio, only in this case it's a fiscal house and subject to its own set of potential pitfalls. With any luck, though, you’ll fare better than Mr. and Mrs. Blandings – if you have the right plan and the right “materials” for each part of your structure.
Let’s take a look at how to put your fiscal house together:
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Start with a Solid Foundation
When you build a house, if the foundation isn’t sound, the rest doesn’t matter. In a sense, the same can be said for the foundation of your financial plan.
Market storms can create problems with your other investments, so it’s critical to have some stability to fall back on if unfriendly winds blow. This stability could come in the form of a simple savings account, certificates of deposit, fixed-indexed annuities or government bonds protected by the U.S. Treasury. You won’t earn much interest with these – you might even struggle to keep up with inflation – but you won’t lose money. And after all, you need to eat, pay the mortgage, and make sure the power company doesn’t turn off your electricity.
If bad times happen, your financial foundation is there for you.
Add Some Investment ‘Walls’
In an actual house, the walls help protect and insulate you from the outdoors, but in our fiscal house the walls represent the next level of investment risk. Here’s where you should have moderately conservative investments – things that aren’t risk free, but also aren’t super aggressive. You might experience a steady 4% to 6% return on your investment, although remember, losses also are possible.
Investments to consider might include municipal bonds, corporate bonds, private real estate investment trusts and hard assets, such as oil, natural gas, gold, silver, farmland and commercial real estate.
Raise the Roof (and Hopefully Your Investment Gains)
Roofs take a heap of punishment. When the sun isn’t beating down on them, rain and hail are. Roofs can leak, and in some parts of the country a hurricane can blow them right off. But they are also instrumental in protecting the rest of the house from the elements.
In our fiscal house, the roof represents the highest level of risk your portfolio can tolerate – but also the greatest potential for growth. These are the investments where you could experience significant losses – or magnificent gains. This is why it’s important to incorporate into your financial plan design a sound foundation and strong walls. If your roof is ever damaged due to market volatility, it should not cause the entire fiscal house to crumble. Assets that make up the roof may include stocks, mutual funds and exchange-traded funds.
Part of the trick in all this, of course, is deciding just how much of your portfolio should be represented by each of these different components.
We believe most retirees can have some element of risk in their portfolio. Typically we’ll want to use the rule of 100, which ties your age to how risky your investments should be. For example, if you are 65, then 65% of your portfolio should be in safer investments, while 35% should be in more aggressive, “roof”-like assets.
But not every person has the same needs or the same risk tolerances, so talk with a financial professional who can help you decide how to best design your fiscal house.
The ultimate goal, of course, is to increase your odds of enjoying a secure retirement. Even Mr. and Mrs. Blandings eventually enjoyed a happy ending.
Ronnie Blair contributed to this article.
Bluestem Wealth Management LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Bluestem Wealth Management LLC are not affiliated companies. Kiplinger was not compensated in any way. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to guarantees or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 914980 – 5/21
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
-
The Real Cost of Streaming Live Sports in 2025Streaming your favorite team keeps getting more expensive. Here’s the true cost of sports — and how to save.
-
It Could Soon Be Harder to Get a Refund on a Flight Gone WrongThe Department of Transportation's deregulation efforts are taking aim at your rights to compensation for delays, canceled flights, lost baggage and more.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial PlannerHolding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their CommunitiesCredit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Answers to Every Early Retiree's Questions This Year, From a Wealth AdviserFrom how to retire in a crazy market to how much to withdraw and how to spend without feeling guilty, a financial pro shares the advice he's given this year.
-
The Risks of Forced DST-to-UPREIT Conversions, From a Real Estate ExpertSome new Delaware statutory trust offerings are forcing investors into 721 UPREIT conversions at the end of the hold period, raising concerns about loss of control, limited liquidity, opaque valuations and unexpected tax liabilities.
-
I'm a Financial Adviser: You've Built Your Wealth, Now Make Sure Your Family Keeps ItThe Great Wealth Transfer is well underway, yet too many families aren't ready. Here's how to bridge the generation gap that could threaten your legacy.
-
Want to Advance on the Job? Showing Some Courtesy and Appreciation Could HelpTwo business professors share their insights about the impact of digital communication on the social skills of some in Gen Z and the importance of good manners on the job.
-
From Job Loss to Free Agent: A Financial Professional's Transition Playbook (and Pep Talk)The American workforce is in transition, and if you're among those affected, take heart. You have the skills, experience and smarts that companies need.
-
A Financial Planner's Top Five Items to Prioritize When Your Spouse Is IllDuring tough times, it's easy to overlook important financial details, but you'll be so much better off if you take care of these things right now.
