Barron's posted an article in the advisor section with advice and examples from advisors about how to diversify away from an AI bubble for anyone who is worried about that outcome. One advisor was willing to put it all on the table as follows.
April of this year is a great litmus test for diversification. The following is just the US funds mentioned by Esler so it excludes the last three listed to make it easier to read.
Not much differentiation.
That the advisor's portfolio lagged for the entire period is not the thing to focus on, it intentionally has less exposure to domestic mega cap tech so of course it lagged. The thing to notice is that when an investor would have needed to look different than simple market cap weighting it did not do so. Echoing Friday night's post, the compensation for lagging on the way up was not adequately compensated on the way down and that appears to have been the objective.
Proper diversification to protect against large market declines need some exposure to holdings that are either uncorrelated or negatively correlated to the stock market.
Next item, the Social Security cost of living adjustments for 2026 came out this week, there will be a 2.8% bump next year. My age 67 benefit as of 2026 will be $3956/mo and my age 70 benefit will be $4985/mo. If my wife takes her spousal when I am 70, she'd be 64, her benefit would be $1549/mo.
The 2.8% seems reasonable in terms of things like groceries, gas and some utilities. The 2.8% seems totally disconnected from things like homeowners insurance, anything related to healthcare and as a personal observation, getting work done at your house. Fair enough if you disagree with me on the grocery comment.
Social Security is an income stream. How far does your projected Social Security payout go to cover your expenses and lifestyle? The SS Administration wants us to know our numbers. If my wife and I actually get $6500/mo (that's a whole other issue), that goes an awful long way to covering our lifestyle. I made a comment the other day that the life we want costs less than what we bring in so we're extremely fortunate on that front.
I think the easiest path to a solution if projected SS plus portfolio income isn't quite enough or if there isn't an adequate margin of safety is to create another income stream. If someone retires with $800,000 in their portfolio, that implies $32,000-$40,000 or 4-5% in sustainable income. Some sort of part time gig or side hustle that generates $25,000/yr is like adding another $500,000-$625,000 to the pot, $25,000 is 4% of $625k and 5% of $500k. Maybe SS plus the side hustle money can be enough for a short time allowing the portfolio to grow untouched.
This is an idea I repeat frequently, it seems pretty clear that many people are going to need to add an additional income stream beyond SS and portfolio income. Even moreso if benefits get cut. Figuring this out is best done sooner than later.
The last one is an uncomfortable article from the WSJ about tech bros and to a lesser extent finance bros in their 50s and 60's getting cosmetic surgery like eyelid stuff and full facelifts. The idea is that older dudes believe that if they look their age they will have trouble competing and staying relevant.
Reading the article, there have been advancements in this type of treatment but the recovery periods seem very difficult and while these might be low risk procedures, the article acknowledges they are not riskless.
It's certainly not for me to say what someone else should do but I would certainly encourage changing behaviors around diet and exercise. The odds of being perceived as competitive and relevant go up when it is clear that you can still get it done. Not having a gut of any sort (cut carbs) and clearly having some muscle mass (not even being jacked) signals that you can probably still get it done before needing to say or do anything and gives at least some credibility. From there, it needs to be earned but I can accept that the starting point is appearance. That's pretty much what the entire article is about.
My experience with my various constituencies is probably completely irrelevant to tech bros and finance bros but the combination of having experience combined with still being able to get it done is powerful.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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