THE 70/30 SPLIT BETWEEN STOCK AND BOND INVESTMENTS

In keeping with my plans to simplify my investments this year, I've decided to go with the 70/30 percent stock and bond portfolio.  Which is, quite simply, you hold 70% of your investments in stocks or stock funds and 30% in bonds.  In my case I'll most likely hold the majority of my investments in broad range index funds for the lower costs.  While many people argue you can do better with actively managed funds, over the long haul the costs of actively managed funds tend to make their performance sub par compared to index funds.  Then too, I truly can't think of any fund manager I believe can consistently outperform the stock index averages.  So I'm going with index funds.

What I find especially attractive about a 70/30 stock and bond investment model is that in order to keep your mix at those levels, you would invest more cash in stocks when their prices are down.  In other words, as the stock market drops and the bond portion of your portfolio goes over 30% because of falling stock prices, you would put more cash into stocks to bring them back in line.  So you're buying stocks at lower prices because you're buying when the market is down.  In retirement, when you're not likely to be adding cash, you can continue this process by selling bonds and buying stocks when the market is down.  When stock prices go back up, you would sell a few stocks and replenish the bond side of your portfolio.  Thus maintaining the 70/30 stock bond mix.  Simplicity itself.