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The benefits of a low-risk investment mix

December 12, 2008 by  

Would you risk your wealth?Although conventional wisdom advises that retirement planners invest 80 percent of their money in stocks and 20 percent in bonds, recent economic events have made some question the wisdom of this plan.

Now, an article in the Wall Street Journal suggests that a lower-risk portfolio that opts for a 50-50 mix of stocks and bonds may actually be nearly as effective for building up a nest egg – and is safer than other options.

Jonathan Burton of writes that although stocks outperform bonds, people who want to minimize losses and reduce their stress level may want to invest more in bonds.

He admits that this investing strategy will probably not earn as much as a high-risk mix, but he contends that the difference "isn’t that substantial" and the benefits of fairly predictable growth with milder drops could be worth it.

"If your goal is to be very confident about having a certain amount of money at a point in time, lower-risk portfolios are actually a cheaper way to get there than a higher-risk portfolio," Christopher Jones of Financial Engines is quoted as saying.

Last month was an especially volatile time for the U.S. stock market, with uncertainty about economic recovery leading to huge jumps and drops within a very short period of time.

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