Morningstar's 2018 Portfolio Makeover Week
Christine Benz helps investors check their progress, assess allocations, target holes and overlap, and upgrade their holdings.
A jittery market like the one that has prevailed during the fourth quarter of 2018 tends to prompt investors to take stock. They worry about enlarged equity portfolios: Are they taking more risk than they should be, given their life stage? Will ongoing market volatility force them to retire later than they had hoped? If they're already retired, is it time to make adjustments or rein in spending?
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 2018 makeovers, which will run Dec. 3-7, 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 2016 and 2017 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, Dec. 3 | Ted | Frugal Retiree Worries That Conservative Portfolio Courts Shortfall Risk
Ted could teach a master class on living well in retirement without a huge budget. With extra time in his schedule, this 70-year-old has rediscovered his love of photography, which in turn has rekindled an interest in travel. He makes do with Social Security and modest portfolio withdrawals, but worries that his conservatively positioned portfolio won't stand the test of time. Both his parents lived into their 90s, so Ted wonders if he should amp up its growth potential--and tolerate greater volatility--to ensure that he doesn't outlive his nest egg.
Tuesday, Dec. 4 | Matt and Emma | High-Earning Tech Workers Balance College Funding with Retirement Savings
Matt and Emma, both 40, earn high salaries, but they're juggling competing financial priorities. They've amassed a good sum for their retirements, but as their assets crossed the $1 million mark this year, they'd like another set of eyes on their investment choices. In addition, college is fast approaching for their two children, ages 10 and 15, so they're also stashing money in 529 plans. And life is expensive in the metropolitan area they call home; they have a sizable mortgage and pay for private schools for their children. Matt and Emma think it's time for a check on their portfolio's positioning, as well as the health of their overall plan.
Wednesday, Dec. 5 | Robert and Jenny | Anxious Retirees Look to Revisit Portfolio Amid Market Volatility
Robert and Jenny, both 75, are thoroughly enjoying their retirement. They're heavily involved in charitable endeavors in their community, and they also love travel, outdoor activities, and cultural events. Robert is a self-taught investor and a big believer in the low-cost, index-centric approach espoused by the Bogleheads; that approach has served as his true north through varying market environments. With recent market volatility, however, he and Jenny are wondering whether their portfolio allocations are appropriate for their ages. As they age, they'd also like to transition to a portfolio that's easy to manage and can help safeguard them against possible cognitive decline.
Thursday, Dec. 6 | Justin and Mallory | Sandwich Generation Couple Seeks Check on Allocations for Retirement, College Funding
Justin and Mallory, both in their mid-40s, have their hands full. They're raising two sons, 13 and 15, and Mallory is also helping to care for her elderly mother. Justin works full time, while Mallory squeezes in freelance work when she can. With their two sons heading off to college within the next five years, the couple has set a goal of paying half of their tuition bills, but they don't want to short-shrift their own retirements. Justin wrote seeking an outside opinion about how to fund their competing financial priorities and ensure that their portfolio is appropriately allocated for their multiple goals.
Friday, Dec. 7 | Bill and Kathleen | Mid-60s Couple Exemplifies the Changing Face of Retirement
At 67 and 64, respectively, Bill and Kathleen are starting to see many of their peers retire. But retirement will have to wait for this couple. They have credit card and student loan debt, so they plan to continue working for another five to seven years in an effort to retire debt-free and to preserve their retirement assets for as long as possible. Bill, an avid Morningstar.com reader, has assembled a portfolio of fine mutual funds, but he'd like a check on its overall asset allocation and how all the pieces work together.