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What is a conservative investor? It depends on who you’re asking. There seems to be a difference between what investment advisors and brokers believe is a conservative investor and what investors believe being conservative means. There are three basic types of investors today conservative, moderate, and aggressive. There are also tweaks to those three types like being ultra aggressive or ultra conservative. In this week’s podcast Tom and Brendan focus on the conservative investor and what they can expect when it comes to their portfolio.
The typical asset allocation model for conservative investors has historically looked something like 60% in equities and 40% in bonds/cash. Across the board this is what conservative portfolios look like for the most part. Tom and Brendan look at some numbers from 2013 so far to show what conservative investors have made.
The S&P 500 is up 23% year to date and the US Total Bond Market Index is down 4%. These are good gauges for the equities and bonds/cash that make up the typical conservative portfolio. So 60% of the account (equities) is up 23%, that’s a 13.8% gain. While 40% of the account (cash/bonds) went down 4%, that’s a -2.4% loss. Adding those numbers together gives us 11.4%. This gives us an idea of what conservative investors should expect to see out of their portfolio so far in 2013. Tom and Brendan also take a look at some numbers from recent years to show how typical conservative investors have been doing.
So what is a conservative investor, what does it mean to be a conservative investor, and what should conservative investors expect to get out of their investments? A lot of that depends on who you’re asking like we said before. The most important thing is that a client and their investment advisor have the same things in mind. When an investment advisor and their client are on the same page they can create a strategic plan. A good plan will include knowing whether to be conservative or aggressive, and will also have tactical elements to it. Investors need more than an asset allocation model that gives them a product mix. When the markets are on offense, defense, or in between there needs to be a steady game plan they can rely on. Learn more about this topic by listening to the weekly podcast.