The best investment portfolio for these times is one you can live with

In two weeks it will be the end of the financial quarter and statements from investment companies will start coming in for those who are able to have retirement savings.

What if you need your money in 2 years, 10 years or 25 years? It makes a huge difference to how we think about this coronavirus quarter.

Veteran investor Barry Ritholtz, president and chief investment officer of Ritholtz Wealth Management, makes sense of this moment with a quick tip on how we should think about things.

“It’s actually three very different wallets,” Ritholtz told Marketplace’s David Brancaccio. “If you have to, have to have your money in two years and want to take very little risk, you’re going to be in a combination of money market funds and some high quality companies. And it’s a very low risk, very low return portfolio that hopefully stays ahead of inflation.

“Historically, we rarely see 10 years pass without positive feedback. So a portfolio that makes more sense to someone who will need that money a decade from now will be something like a classic 60/40 portfolio, i.e. 60% broad stock indices and 40% ‘obligations. You should see a return above inflation in most 10-year periods.

“And then 25 years – 25 years is a long time in the stock market. And you would want to be pretty aggressive, either 70/30 or 75/25 stocks and bonds. The reason why I never recommend people to just use stocks, even though this portfolio would do better, it’s exactly because of times like this, or ’08/’09, or 2000. You know, the optimal portfolio isn’t the one that earns the most money, but it’s one you can live with. And I can guarantee you that people who are in all stock portfolios, they’re having a hard time looking at a market that was hitting all-time highs a month ago, and which is now down 30% or more. We have seen $20 trillion in wealth disappear.

“Now it’s only temporary. My best guess is that once we get through the coronavirus, it will come back. But if you’re up all night stressing about it, and the only way to relieve that stress is to sell, well, you’re not going to participate when the market recovers. You must take the good with the bad, and that too will pass.

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