Ignore the market, stabilize your income

EconSM (Photo credit: kellypretzer)

New York sept.21 stock trade .- For most of the spring and summer, my favorite portfolio for older baby boomers blossomed with the new season's flowers. But then, in turn, it faded somewhat with the late-summer drought.

In mid-June, my Stable High Yield model was beating the S&P 500 Index by 14% , based on the 11-month history of the portfolio.

As of Sept. 18, that spread had decreased to 8% thanks to the recent stock market rally. Indeed, over the past 90 days, the S&P 500 has risen by 7.6% while my model has increased by 4.2% .

Is this cause for concern? Well yes, but only if you ignore the respective inherent risks and believe that the rally is a mere slice of a sustained bull market to come. Let's address the latter question first.

Whether a secular or even cyclical bull market is under way is a fundamental premise for an individual's portfolio design. I don't happen to think it is, at least in the historical 10%-average-annual-return respect, nor should returns in that area be expected over at least the next several years.

If we accept that assumption, the matter of the first question — comparative risk — becomes paramount. How much risk should an older baby boomer take in order to achieve an acceptable return? the ... Continue to read.

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