Your Survival Guy

Preparing your investments and family for when disaster strikes.

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Why You AWLAYS Need This in Your Portfolio

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By Elena Butor @ Shutterstock.com

Your Survival Guy wants you to understand that you own bonds so you can invest in stocks. As the late, great, Ben Graham explained about portfolio allocation, investors need to fall within a 70-30 mix of stocks and bonds, or vice versa.

In other words, even the most aggressive stock jocks need to have some bonds as an anchor to windward. You might be shocked at how much of a cushion having just 30% in bonds can provide for a portfolio in a market decline. But check out Your Survival Guy’s Deadliest Markets This Century for proof.

And for the most conservative, or wealthy among us, who don’t want to fool around with stocks because they’re already as rich as Croesus, there’s the 70% in bonds. You’ll note below the steady as we go success of Richard Young’s Maximizers. There’s nothing wrong with becoming rich slowly. (Invest Like a Rich Man, Not a Poor Man).

Think about your bonds as an asset, much like a home. When interest rates go up, real estate prices go down. If a home has a $400,000 listing price and interest rates are at 4%, a buyer does the mental math to see if it’s better to rent or buy. When interest rates are 11%, that house will probably sell for a lot less (if the owners are serious about selling).

When you consider your exalted standing as a bond holder (with first rights to any assets in the event of default) you can see in Your Survival Guy’s Capital Structure Pyramid that you’re well above the common shareholders.

In this market you need to know the 5 W’s of what you own. Because when you look closely at the mutual funds and exchange traded funds (ETFs) in your portfolio, you might find that their top ten holdings all look very similar. You thought you owned hundreds of stocks, but it’s the same top ten holdings driving the bus in most of these market cap weighted funds—the 800 pound gorillas.

Action Line: Walking amongst the wreckage in a scorched earth economy requires Your Survival Guy-like instincts. You need to be focused. I can help. If you’re serious. Click here to sign up for my free monthly Survive & Thrive newsletter, and each month I’ll push you to stay focused and achieve your goals. But only if you’re serious.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com