7 A Review of Traditional Investment Accounts

Reading through this book until now, you might have gotten the (wrong) impression that we are not big fans of common stocks, government bonds, exchange-traded funds (ETFs), mutual funds, and traditional diversification, since we haven’t had much (good) to say about them. If you recall, we pointed out how risky they can be and how a run of bad luck with these investments—at the wrong time—can practically ruin your retirement. But does that mean you should avoid them outright? Well, the fact is that nothing could be further from the truth. Although we haven’t yet discussed precisely how conventional investment products fit in a pensionized portfolio, let us make it clear that they should be at the core of a properly structured retirement income plan.

Thus, although we are advocates of product allocation, we don’t want to downplay or ignore the importance of traditional asset allocation. And if we are guilty of downplaying the classical instruments of financial planning, it is because they are ubiquitous, well understood, and widely described by other sources. In other words, we don’t want to bore you with something you probably already know.

Recall that the main point we are trying to make in this book is that all current, future, and soon-to-be retirees should allocate their financial (capital) nest egg across more than just stocks, bonds, cash, and commodities. No matter how diversified your investments are, diversification and ...

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