Investors, if they wish, certainly are free to introduce some flexibility into the mix. Indeed, re-assessing your personal goals, and your path to those goals, is advisable for even the most hands-off investors. For example, with respect to 4-AC, it may make sense to ramp up the S&P 500 allocation to, say, 30% while reducing one of the other classes by five percentage points. You might do this based on a changing personal financial picture or your personal assessment of broad economic trends.
Investors also could invest a portion of their stock allocation into emerging markets or the Nasdaq. Likewise, a bit of the bond portion could be switched to five- or 10-year Treasury notes. However, these moves are just fine-tuning. None of them would affect the outcome much over the long term.
The ultimate lesson may be that investing well in a shifting financial landscape requires delving into areas that provide further diversification to the traditional investment classes of stocks and bonds. Perhaps 4-AC, because it exposes you not only to different asset classes but also to more opportunities to adjust and fit the investment balance to the prevailing investment climate, is the better answer for portfolio diversification in today’s financial marketplace.
Dick Stoken is president of Strategic Capital Management and author of “Survival of the Fittest for Investors.”