More Real Estate & Stocks, But Be Very Selective


Today, I’m releasing new asset allocation targets for long-term oriented investors of all ages, as well as active traders.    Remember, these are aimed at a general audience and are not personalized recommendations for any single investor.  Consider your own personal goals and risk tolerance when making your final selections.  More important disclaimers can be found on this page.

The most important update I made to the long-term allocations (and indirectly, to the allocations for active investors) was to increase the allocation to real estate by a few percentage points.  Many investors will already have this much exposure to real estate through equity in their personal residence.  For those that don’t, REITs will get you there.  Listen to my introductory podcast on REITs to learn about this exciting asset class.  I also recently published a video on one of my favorite picks.  I’m careful to choose REITs that I think are most likely to maintain or grow their share price over the long term while paying a good dividend yield.  Stay away from most REITs in the health care, office building, and retail areas.

I also bumped up the allocation to stocks.  Don’t read too much into this, as it relates to my overall stance on the stock market.  Stocks are generally overvalued at this time.  However, I do think you can find enough strong companies to fill out a portfolio if you are selective.  Here’s one I recently talked about on the live stream.  And, we must acknowledge that there are few alternatives to stocks in this low-interest-rate world.

If you own a business, or are a equity partner in one, your share of the value of that business counts in the Equity category too.

OK – now for the asset allocations.

If you’re a long-term oriented investor, making adjustments to your portfolio only a couple times each year, these are the baseline targets:

Long-Term Allocations


If you are an active trader, consider these allocations instead.  They’re based upon the long-term targets, but adjusted for my latest intermediate-term market outlook (6-18 month horizon).  These change much more frequently, as chart patterns emerge and develop.

Intermediate-term allocations


Consider using options to limit downside risk on stock positions.  You might also consider preferred stock for the greater protection it provides, over common stock, but remain cautious because preferred stock will drop if we see a big downturn in the market.

Wealth-building is a marathon, not a sprint.  Staying defensive in a market like this one will keep your portfolio intact.  A cash reserve will position you to leap on bargain prices when we see them.

Emergency cash and structural cash (beyond a little structural cash for where we’re at in the long-term economic cycle) are NOT included in these allocations.

This episode explains the three different buckets of cash:

Once you’ve determined how much cash you want to keep outside the markets, here’s how to adjust the asset allocations:

(1) Let A = 1 – Cash % shown in the asset allocation you’re looking at

(2) Let B = 1- Cash % you want to keep

(3) Multiply all asset allocations (except cash) by (B/A)

Now the “Base” allocations will sum to 100% with your new cash %.

You can use the same procedure with Property, Owned Real Estate, or anything else instead of Cash to account for assets you may have in those classes.

Get the Early Scoop When Allocations Change

Going forward, members of our community platform will receive updated asset allocations at least one week ahead of when I release them to the public blog.  Members will also get detailed sector-by-sector breakdowns within several of these asset classes (e.g. retail stocks vs. utilities, consumer staples, etc.).  Membership starts at only $5/month for the Bronze level.