The ‘Retiring Early’ Portfolio Makeover, Moving From Stocks To Balanced Allocation

This week has marked a feature series from Morningstar’s Christine Benz for “Portfolio Makeovers.”  The focus so far has been around planning for the ultimate goal of retirement and today’s feature is of a young retiree whose balance of funds are almost all in stocks.  The obvious move is not to move just entirely to bonds, but taking a balanced portfolio is the right move.

Morningstar’s portfolio makeover is for Susan, a fairly young retiree who has $2.8 million in assets and is planning to fund 30 years or longer for retirement. Being in all-stocks here is a mistake, but some of the surviving mutual funds in the equity portion of the portfolio are Harbor International (HAINX), T. Rowe Price Small Cap Value PRSVX), and Amana Trust Growth (AMAGX). The full report is called “A Young Retiree’s Portfolio Grows Up.”

Her fixed-income holdings of DoubleLine Total Return (DLTNX) and Artio Global High Income (BJBHX) were both called “good starting points” in the portfolio.  The recommended balance for these holdings were T. Rowe Price Short-Term Bond (PRWBX), Harbor Bond (HABDX), Loomis Sayles Bond (LSBRX), and Harbor Real Return (HARRX).

The idea here is not having too many eggs in one type of asset basket and Morningstar is running features and a seminar on this topic for retirement.  Being retired and having all of the money invested in the volatile stock market is no good.  Interestingly enough, a prior portfolio makeover this week from Morningstar actually showed the pitfalls of being too conservative in retirement with inflation overpowering peace of mind.

JON C. OGG