Expert: Paul Henneman - 3/13/2006

Question
I have 2 401ks and an IRA handled/rebalanced by AssetMark using their funds, all totalling about $174,000. I plan to put a total of $20,000 into JP Morgan 401K mentioned above this year.  I am 50. Securities are about 75% of my holdings.  I recently read BULL! about the last bull market and on PBS Wall Street week on Friday, their guest stated that this market had topped out and was about to get very bearish.  Should I shift into more Fixed Income for a time to save some of the growth I've accumulated? What's it look like ahead to you. Also read Paul Merriman's book which is very buy and hold. Thanks.

Answer
Nelson,
  Thank you for your question! It is a good one.
  The main advice I would give to you is to not try to market time. Some experts will say bull, others bear, all at the same time! Ultimately I believe that it is basically impossible to determine this.
   This means that you should be fully invested, all the time, but diversified so that if the market goes up you benefit, but if the market drops you are ok. This will also help you sleep at night.  75% in securities is probably a bit high for this. I would suggest 50% at the most in securities, the rest in mutual funds. Be sure to select mutual funds that specialize in different market segments, such as technology, health care, real estate, or others. This will further help to protect you if the market drops as  almost never do all economic sectors fail at the same time. For example, in 2000 through 2002 technology stocks were horrible, and so many folks were invested it actually caused an overally economic downturn. But if you had at least a small portion of your investments in stocks that were related to real estate, or mutual funds that were, then it could have offset this market downturn.
  Fixed income is good, for about 25% of your portfolio. CD's or bonds for example. My suggestion would be: 40% in securities, 25% fixed income and 35% mutual funds (always hold multiple funds that focus on different sectors, a general S&P500 index fund would be good as well). This should give you good returns, protect you in down markets, and let you sleep at night!

I hope this helps! Please do not hesitate to reply if I can be of any further service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com