Clinging to your stocks and bonds

A useful personal investing article in the Dec. 26 New York Times about bonds, pointing out that bonds and bond funds have also fallen victim to the financial crisis and concluding with a helpful list of what’s available.  But hey, NYT, bonds aren’t just for old people!  (The headline: “Older Investors Should Examine the Risks in Bonds.”  Oh well, I’ve seen worse headlines — will somebody please inform their headline writers that “printing money” and “issuing Treasury bonds” are two different things?)

By now, the personal finances are way overdue for a rebalancing.   Burton Malkiel, author of the great A Random Walk Down Wall Street, suggests the following portfolio allocation for people my age (early 40s):

60% STOCKS (20% international, 20% growth & income, 10% small cap, 10% growth; all in stock funds, not individual stocks)

35% BONDS (12.5% GNMA mortgage bond funds, 12.5% high-grade bond funds, 10% T-bills)

5% CASH (money market funds or short-term bond funds)

I can’t follow that completely, as I derive too much pleasure from the lottery tickets known as individual stocks (and I figure it’s not too reckless as long as they’re a small part of the overall portfolio), and I’m not putting any money into Treasury bills while they’re paying 0% interest, but it still looks like sound advice.  Having a third of your stock holdings be international stocks sounds especially logical (not that European or Japanese stocks have been going gangbusters themselves lately).

Some stock-market links from a couple months ago, when the Wall Street crisis was in full roar:

• Malkiel says stockholders should ride it out (13 Oct. 2008 )
• James Hamilton says much the same thing, and has some semi-specific investment advice that’s worth a look (13 Nov. 2008 )
• Which is not to say that stocks are necessarily a bargain right now — they may have a long way to go before they bottom out (David Leonhardt in The New York Times, 29 Oct. 2008 )
  • The concept in song form:
    • So I’ll meet you at the bottom if there really is one
      They always told me when you hit it you’ll know it
      But I’ve been falling so long it’s like gravity’s gone and I’m just floating
      • — Drive-by Truckers