What Is The Perfect Mix Of Stocks And Bonds For My Portfolio?

Timothy Brown |

By Timothy Brown, MBA, CFA®, CFP®, RICP®, AIF®

What is the perfect mix of stocks and bonds? Your tolerance for risk and personal goals come into play, but there are some tried-and-true guidelines we use to lead our clients toward success. 

Review stock market returns through history and you’ll find that approximately 3 out of 4 years, the U.S. stock market provides a positive return. We design client portfolios to help clients meet their goals. This means understanding your goals and the timing of when you need cash from your portfolio. Only after understanding your needs and goals can we design a portfolio customized to your situation.

Risk Tolerance And Goals

We want to understand your short-term needs for money from the portfolio. How much money do you need from your portfolio in the next 5 years? We then set aside a war chest of cash and bonds within your portfolio to ensure that we are able to fund 5 years of withdrawals regardless of short-term stock returns.

We all know stocks are inherently more risky than bonds, but they also have potential to produce much higher returns. How much of your portfolio is meant for long-term investment (5 years or more)? We then consider investing this portion of your portfolio in diversified stock investments.

Finding The Perfect Mix For You

At Brown Wealth Management, we partner with people who are good stewards of their finances and dream of a financially secure retirement. We propose a long-term strategy focused on your goals as opposed to seeking quick wins or supporting your current everyday needs before retirement.

While you’re riding the waves of the stock market at any given time, you can have confidence to stay invested with discipline if you know that you don’t need to sell any stocks for 5-years and you can still withdraw the income you need from your portfolio. This safety net helps you to ride the ups and downs of investing in stocks.

And the rest of your portfolio beyond your war chest? We suggest allocating all remaining funds to stocks. When (not if) the market falls, we take the opportunity to rebalance and buy more while prices are low.

Since 1926, the S&P 500 has rewarded investors with an average annual return of about 10%. However, investing in stocks requires discipline and staying invested. When (not if) the market falls, we take the opportunity to rebalance and buy more while prices are low. We are committed to not selling even when it seems like the world is ending.

Your Journey Toward Retirement

Your portfolio will evolve as you approach retirement. You may take a more conservative approach when closer to retirement or you might find that you have more capability to invest for the long term than you might think. This will look different for everyone as personal financial planning targets individual needs.

Keeping a future-focused mindset is key to long-term success in the stock market. While the future is always uncertain, a diversified portfolio can help offset many unknowns. And beyond diversification, patience and discipline are the ultimate keys. 

Creating Your Investment Portfolio

When it comes to making the actual investment selections, creating the ideal mix on your own may not be your best bet. We have built a team with experience and expertise in building portfolios that can help you accomplish your goals.

When you partner with us, you can lean on our industry expertise and rely on our keen interest in monitoring market trends. Most importantly, we can coordinate your portfolio with your all-encompassing financial plan that guides you toward your personal financial goals.

We’re Here To Help

If you’re interested in learning more about investment options or retirement planning, our qualified team at Brown Wealth Management in Eden Prairie, MN, would be happy to review your plan. Schedule a free introductory call today by reaching out to us at (952) 303-6715 or https://www.brownwealth.com/getting-started.

About Tim

Timothy Brown is founder and president of Brown Wealth Management, an independent, full-service wealth management company that helps individuals and families prepare for all of life’s milestones and events. With more than 20 years of experience in the financial industry, Tim strives to help his clients live happier, more fulfilling lives with the confidence that they have been good stewards of their finances. Tim has a bachelor’s degree in finance and accounting from the University of Colorado and an MBA from the University of Minnesota’s Carlson School of Management. In addition, he holds a rare combination of credentials: Certified Financial Planner™(CFP®), Chartered Financial Analyst™ (CFA®), AIF® - Accredited Investment Fiduciary™ (AIF®), and Retirement Income Certified Professional® (RIPC®). Tim has been recognized for his hard work by receiving the Five Star Wealth Manager award in both the Mpls.St.Paul Magazine and Twin Cities business magazine since 2013. 

When he’s not working, Tim enjoys spending time in Eden Prairie with his wife, Stacey, and their four children. You can often find him keeping busy by staying fit, pursuing a black belt in Tae Kwon Do with his three boys, assisting kids with Boy Scouts, and attempting to read two books per month. To learn more about Tim, connect with him on LinkedIn.