For stock investors, 2024 was an expectedly great year. Behind the continued bull market for stocks was solid economic growth, falling inflation, Federal Reserve interest-rate cuts, and healthy corporate earnings.
Strong 2024 performance may be tough to replicate given tight credit spreads, but we still have a favorable view on corporate bond investments given the strong economy.
Asset allocation should be based upon your age and your risk comfort level. At 60, the rule-of-thumb is 60% equities with the remainder in cash/bonds, etc.
The 60/40 portfolio, a long-used allocation strategy, has been challenged since the link between economic growth and inflation started to sever during the pandemic. Bonds' low or negative correlation to stocks, low volatility and consistent returns reversed, limiting their effectiveness as a portfolio diversifier.
A globally diversified portfolio of 60% stocks and 40% bonds declined about 16% in 2022—a painful period for balanced investors that raised doubts about the viability of this strategy. Some commentators even declared the old standby dead.
The 60/40 portfolio should offer a better risk-reward in 2024. The 60/40 formula for buy-and-hold investment portfolios may return between 4% and 5% and become less risky next year, as major central banks gradually pivot from ratcheting up interest rates to lowering them, according to Goldman Sachs Research.
While retirees should in most cases be in the stock market, it can be so volatile in times of economic uncertainty. It's always wise to secure other ways to maximize your retirement resources so you don't find yourself in an unpleasant situation.
The $1,000 per month rule is designed to help you estimate the amount of savings required to generate a steady monthly income during retirement. According to this rule, for every $240,000 you save, you can withdraw $1,000 per month if you stick to a 5% annual withdrawal rate.
Global growth forecasts are largely unchanged from last quarter, with the pace of economic expansion in 2024 slowing moderately in 2025. Easing inflation, resilient consumers, and a broadening of central bank rate cuts underpin our expectations for a soft landing.
Mike Cudzil, senior bond portfolio manager at Pimco, says he believes bonds will be attractive relative to stocks in 2025. If the Fed cuts rates further this year, as expected, that would give bondholders a boost in price. Bond yields and prices move inversely.
We expect: Another cut to the Fed's target for short-term rates on December 18, 2024, putting its policy rate at 4.25%–4.5% for year-end. We anticipate the Fed will reduce its rate target further in 2025 to a range of 3.75%–4%.
Goldman's investment strategy group expects the S&P 500 SPX will end this year at 6,200-6,300, implying a rise of 5% to 7% from the end of 2024 and a total return of 7% to 8%, the report shows.
Global equity markets are likely to remain challenged in 2024 as the world transitions to a regime of higher trend inflation and interest rates. This transition could generate shifts in earnings growth expectations, triggering volatility. Close attention to risk management will be needed.
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
Just 16% of retirees say they have more than $1 million saved, including all personal savings and assets, according to the recent CNBC Your Money retirement survey conducted with SurveyMonkey. In fact, among those currently saving for retirement, 57% say the amount they're hoping to save is less than $1 million.
Kevin O'Leary: By Age 33, You Should Have $100K in Savings — How To Get Started. If you're just starting out in your career, $100,000 might seem like a lot of money. After all, the median salary of a 20- to 24-year-old, according to Bureau of Labor Statistics data, is just $37,024.
For instance, a 70-year-old retiree might aim for 40% in equities and 60% in bonds or cash equivalents. Of course, this is a basic rule of thumb. Individual factors like risk tolerance, health, and retirement goals should also be considered when determining an asset allocation in retirement.
Time in the market is important
Companies pay out dividends to reward their shareholders for holding on to their investments. If you're investing in dividend-paying companies you're doing yourself a disservice if you pull your money out due to drops in the market.
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
Money market mutual funds generally offer the greatest level of flexibility and liquidity along with the lowest risk of principal loss among the available short-term investment products. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest-rate risk.
“Sixty-forty is still a good benchmark for a balanced portfolio,” said Jonathan Lee, senior portfolio manager at U.S. Bank. And Todd Jablonski, global head of multi-asset investing for Principal Asset Management, considers the 60/40 rule “very much alive.
A standard example of an aggressive strategy compared to a conservative strategy would be the 80/20 portfolio compared to a 60/40 portfolio. An 80/20 portfolio allocates 80% of the wealth to equities and 20% to bonds, compared to a 60/40 portfolio, which allocates 60% and 40%, respectively.