Morningstar's 2017 Portfolio Makeover Week
Nov. 13-17: Christine Benz helps investors check their progress, assess allocations, target holes and overlap, and upgrade their holdings.
A lofty market--like the one that has prevailed since early 2009--tends to prompt investors to take stock. They eye enlarged balances, wondering if an early retirement might be possible after all. They worry about enlarged equity portfolios: Are they taking more risk than they should be, given their life stage? They might also fret about taxes, because high returns can translate into higher tax bills.
At Morningstar.com, we've developed our annual Portfolio Makeover Week to help showcase real-life strategies for helping investors navigate these and other questions. Our 2017 makeovers, which will run Nov. 13- 17, feature the "before" portfolios of actual investors at various life stages and asset levels.
Morningstar director of personal finance Christine Benz will provide suggestions for improving those portfolios, touching on asset allocation, asset location, and in-retirement withdrawal rates, among other factors. (In case you missed them, you can also check out Christine's 2015 and 2016 makeovers.)
You can find a summary of each makeover below. Stay tuned all this week to see the full makeovers and for more ideas on how you can make your own portfolio upgrades.
Note: Names and other potentially identifying details in the following makeovers have been changed to protect the investors' privacy. Makeovers are not intended to be individualized investment advice, but rather to illustrate possible portfolio strategies that investors should consider in the full context of their own financial situations.
Monday, Nov. 13 | Catherine and Roberto: Early Retirees Troubleshoot Potential Vulnerabilities in Their Plan
At 56 and 58, respectively, Catherine and Roberto have embarked on an early retirement, relocating from New England to the Pacific Northwest. They're in the enviable position of being able to rely on a generous pension, and their portfolio also appears ample. But they're also concerned that their portfolio is too conservative given their very long time horizon, and they worry that big long-term care costs, should they occur, could blow a hole in their plans.
Tuesday, Nov. 14 | Abby: Late Bloomer Mulls Retirement Readiness
55-year-old Abby didn't get serious about her career until she was in her early 40s, but has been a heavy saver ever since. "Being poor for so long," she wrote, "I'm still not a big spender and saving quite a bit." But her job is demanding, and she longs for the day when she can downshift into a more gratifying, less taxing position and eventually retire altogether. To date, she has been a self-taught investor and maintained a very aggressive equity weighting, but she'd like another set of eyes on her plan.
Wednesday, Nov. 15 | Diane and Stephen: Retirees Get RMD-Ready
Diane and Stephen are 69 and 70, respectively. Starting next year, Stephen will need to begin taking required minimum distributions from his retirement accounts. The couple wrote seeking advice on whether their equity-heavy $1.5 million portfolio is conservative enough given their life stage. They’d also like guidance on the long-run viability of their plan: Stephen’s pension provides a healthy share of their income, but Diane would receive just part of that amount if Stephen predeceases her.
Thursday, Nov. 16 | Eric and Lindsay: Multitaskers Balance Retirement Investing, College Funding
At 39 and 40, respectively, Eric and Lindsay are classic multitaskers. They know they need to be saving for their own retirements, but they also want to plan for college for their two children--a newborn and a 2-year-old. How should they balance the two goals? Eric has been investing in earnest for a few years, but would like a second set of eyes on their plan. "The more I learn," he wrote, "the more I'm aware of my ignorance. I would like to simplify my portfolio and understand what each piece is doing and why."
Friday, Nov. 17 | Helen and Joe: Retirees Navigate a World with Low Yields and Lofty Stock Valuations
At 77 and 78, Helen and Joe have been retired for a while now. They have a $700,000 portfolio and another $200,000 in cash. But as is the case with many retirees, the current market environment leaves them scratching their heads. "Our present concerns are that fixed income does not return much and the stock market seems to be overheated," Helen wrote. They'd like guidance on positioning their portfolio to meet required minimum distributions while not taking undue risk.