Like many people, I don’t believe 2008 is going to be a great year for equities. Between the election, the war, oil prices, and the subprime fallout, there is no reason to expect equities to take off.
With these expectations, I have a plan.
1. Taxable Accounts: Because I don’t believe my cash cushion is adequate, I don’t “invest” taxable money. 100% of my free cash flow goes into extremely safe vehicles (savings accounts, CD’s, money market) or debt reductions.
2. Retirement Accounts:
a. IRA: Almost 90% of my portfolio, it is invested roughly 30/30/30% in a ST Bond Fund, a MT Bond Fund, and a Foreign Equity Fund. The remaining 10% is in cash.
b. 401(k): Despite the tough expectations, I will invest 100% in a diversified portfolio of equity funds. Basically, I will treat the company match as insurance and hope to benefit from a long term increase in world equities.