Each year as I get closer to retirement I now trim back 1% to less riskier investments, I am 6 years away from retirement. I started out 40 years ago at 100% in equities and with a super aggressive portfolio and put anything in the market I could. My portion of my portfolio that is exposed to the market is not overly aggressive right now (by no means grandma portfolio), that is designed to protect against downside risk with as much upside capture ratio, portfolio that projects to do well on the efficient frontier graph. Trimming the hedges each year will protect me in the event the market crashes 6 months before I retire. When you save really early in life and do it consistently it is easier to slowly throttle back as you near retirement and you are not having to chase returns. For those not familiar:
The efficient frontier is the set of optimal portfolios that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.
I put about 10% of my investments in to a annuity recently. It protects me on the first 10% of a market decline based on the contract date, I "only" get 17% of the upside. There are other elections you can make each year as well.
Alianz since then has come out with a product that protects you on the first 20% of a market decline based on the contract date, with no cap on the upside, the difference is the measurement date for the market decline is 3 years from contract date. These products are more expensive, but IMO that is a great tool for a fully diversified portfolio in an environment in which bonds return nothing as well as other investments. Sounds like an investment made for Biden, huh?
I have some cash on the sideline, and blew getting in the market at 19,000 this year, my broker timed it perfect and called me and I could not pull the trigger, it was a once in a lifetime market opportunity I missed, I perhaps am learning as I get older I am more risk adverse.
I am fortunate I am positioned to take advantage of a down market right now and can do it in a way with little risk and great upside. I also have saved well and fortunate to have an annuity work well in a diversified portfolio and should I pass first, give my wife the security of some fixed income for her life.
So, if Biden gets in, and the market falls, I think the annuity represents a great opportunity to be in the market and purchase in a down market, and to limit my risk on the first 20% of the fall of the market, with the potential to get all the upside. If you get in the market for example after it has dropped 10% and unknown to you it will drop 25%, based on when you purchased, that covers you on a 30% drop of the market from the time Biden came in.
Did you know individual balance sheets have never been better in this country? It is true, consumers have not been running up credit card debt and with the government dropping cash from helicopters in stimulus money, as long as Biden does no totally screw up the economy the market will rebound, not like it would under Trump but it will rebound. If Biden and the Dims destroy the economy, they will be out in 4 years. The staunchest of Trump supporters on Wall Street believe that Biden and the Dims are not so stupid to do all the crazy shit the extremists in their party want, it would be political suicide. If the Reps maintain the Senate? Wall Street would like this the best if Biden wins because you will have political grid lock and the oddity of that? That is a stable environment, no change.
The economy is still the #1 issue for voters based on polling, and on this issue it is the single most important issue in the election by 16% of the voters, by far the leading issue, and polling after the debate indicated this as well.