Build Mountains of Money with a Responsible Portfolio
“Eat your Brussels sprouts,” I used to hear when I was a kid, “and you'll grow into a big, strong boy.”
So I ate a bowl of Brussels sprouts for breakfast, a plate of Brussels sprouts for lunch, and a casserole dish of Brussels sprouts for dinner—seven days a week.
If that were true, I'd probably resemble a green, leafy ball with legs by now. Brussels sprouts might be good for you, but you need to eat more than a bunch of tiny cabbages if you want to be healthy.
In the same vein, a total stock market index fund might be good for you as well, but it doesn't represent a balanced portfolio.
If that were all you bought, your portfolio would gyrate wildly with the stock market. If the market dropped 20 percent, so would your overall portfolio. If the market dropped 50 percent, so would your total investments.
This isn't good for any investor, especially those approaching retirement and needing more stability. If a 60-year-old plans to use her portfolio as a nest egg, she's not going to be comfortable seeing all of her hard-earned money plunge into what might look like a bottomless crater during a sharp market decline.
Only an irresponsible portfolio would fall 50 percent if the stock market value were cut in half. That's because bonds become parachutes when stock markets fall.
What Are Bonds?
Bond is a secret British agent with a license to kill. He sleeps with multiple women, never dies, and every 15 years or so, gets a body ...