Revenge of the Buy-and-Hold Nerds

Focus: MARKETS

Howard Gold Image Howard Gold Founder & President, GoldenEgg Investing

I also had 7% in hedges, commodities, and currencies, mostly through ETFs.

(The current allocation is 46% stocks, 26% bonds, 21% cash, and 7% other. I’ll probably sell some bonds to put more money into stocks during market corrections.)

My February 28, 2008 column, “Your Ideal Portfolio for Now,” written two weeks before Bear Stearns’ collapse, recommended a similarly diverse but even more stock-heavy portfolio.

Without any rebalancing or reinvestment of dividends—and assuming a very slight return on cash and modest stock dividends and bond yields—that portfolio, too, is close to break even.

This apparent recovery in many Americans’ portfolios is good news for the economy. Because of the “wealth effect,” rising asset values prompt consumers—especially the more affluent—to spend more, and the statistics bear this out. 

Personal spending grew by 0.6% in March, a nice bump. That outpaced income growth, helping the saving rate drop to 2.7%, its lowest in 18 months.

Marilyn Capelli Dimitroff, president of Capelli Financial Services in Bloomfield Hills, Michigan, says her clients are spending more, buoyed by the recovery in the markets.

“There’s significantly less fear now,” she says. “Everyone feels able to spend a little more.”

But they’re not going nuts. “It’s not as if everyone has the attitude, ‘happy days are here again,’” she adds.

And of course, there’s no guarantee the market will hold up; indeed, the bears may have their day again.