A. If you believe in Burton Malkiel, the author of the classic "A Random Walk Down Wall Street", who just published the latest edition of this classic book published 43 years ago, you might not want to do. In fact, Mr. Malkiel had 3 new ideas in his latest edition of the book:
1. Substitute bond funds with companies with a history of raising dividends.
While stocks are riskier than bonds, but in today's low rate environment, for example, 10-year Treasury yield only at 1.7%, barely beats inflation at 1.6%. If inflation rises to 2%, the Fed will raise the interest rates, which will further hurt bonds as bonds' prices and interest rates move in opposite directions.
2. Be cautious of target-date funds
As people near their retirement age of 65, the target-date funds will swap stocks to bonds, which as described in 1. above, investors will suffer; furthermore, today's retirees at age 65 have a long life horizon, as long as 30 years, holding a large portion of bonds in the retirement portfolio is way too conservative.
3. Avoid smart-beta funds
Smart-beta funds, as we have introduced here and here before, are hot today. However, Malkiel has a chapter in his book dedicated to this topic and concludes that smart-beta promises higher return simply because they take on higher risks!
Maybe it's time for you to grab Burton Malkiel's latest book - A Random Walk Down Wall Street: a time tested strategy for successful investing at Amazon, only $10.
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