Protecting Your Portfolio
As you get closer to retirement, you'll want to take less risk but maintain solid growth. Here's how to tend your nest egg
Bond investors must also be mindful of a different type of risk: interest rate risk. That's the risk inherent in holding long-term bonds. Typically, the market rewards investors for buying long-term bonds by promising higher interest rates. But in recent weeks, short-term bonds have actually yielded more than long-term debt. So this is probably a good time to stick with short- and intermediate-term treasuries, rather than extending your portfolio into extremely long-term bond funds. Roge thinks investors would also be wise to have some exposure to inflation-protected treasury bonds, which maintain their value even if inflation flares up.
Perhaps the biggest way to reduce risk in your portfolio is to keep a closer eye on your investments. Recent studies have shown that the vast majority of 401(k) investors leave their investments untouched for years at a time. But if you're making tactical decisions to reduce volatility in your nest egg, you will have to revisit your portfolio more frequently. At the very least, check on your holdings every quarter or two. Then, rebalance your portfolio back to your comfort zone on an annual basis.
Your retirement may well end up being a 30-year journey. Over the decades, the economy and the markets will pose new challenges, but your need to grow your portfolio while managing your risk will never change.
advertisement
