Page 41 - Kiplinger's Personal Finance - November 2018

Commentary

INCOME INVESTING Jeffrey R. Kosnett
The Case for Keeping Some Cash

wo issues ago, I urged everybody risk, income-driven investment plan. least not a disincentive, to park some
to suspend all inclination to The super-strong dollar, a lead cause or all of the money from a house sale
Tbrood about gathering risks or of emerging-markets troubles, isn’t or a lump-sum retirement or insur-
missed opportunities and let one’s without drawbacks, but it supports the ance distribution.
portfolio snooze. I obeyed my own value of U.S. bonds and real estate. It I asked some veteran financial ad-
counsel, not only by skipping this col- also restrains American inflation. visers and money managers for fresh
umn for a month, but by ignoring my thoughts about asset allocation and
IRA and 401(k) and other investment Darker skies. But I don’t feel comfort- de-risking. I must say that their argu-
accounts. In August, I sold a house able telling anyone, including myself, ments for caution resonate more than
I’d owned for 27 years, but so far, the to extend portfolio abstinence indefi- they did six months ago. “U.S. fixed
proceeds are in the bank while my nitely. Kiplinger is not alone in sensing income is more challenged now be-
wife and I decide what comes next. that financial markets will eventually cause it’s hard to see how the Federal
(We’ll probably zero out the mortgage get rattled by trade discord or some- Reserve stops tightening,” says Krishna
on our vacation—and our eventual thing else and stumble toward higher Memani, the chief investment officer
retirement—home.) Whether it’s ad- inflation and a near or actual reces- of OppenheimerFunds. He adds that
visable for others to grab some capital sion. The scolds that scoffed at the “cash is definitely more valuable”
gains, pay off debt or make other moves prospect of Alphabet trading at $1,200 than before. He recommends a fixed-
is a personal, life-stage decision rather a share or Amazon.com at $2,000 have income mix of 50% floating-rate bank-
than a blanket financial strategy. long been wrong—as they were about loan funds (a kind of juiced-up cash
Besides, anyone who forswore buying with yields that rise as rates
and selling securities since June, climb) and 50% short-to-
not counting autopilot transac- FOR THE FIRST TIME IN intermediate-term investment-
tions, has done just fine. grade bonds (which lose less
Stocks advanced a little, YEARS, CASH ACCOUNTS ARE than longer-dated issues as
bond yields and returns COMPETITIVE WITH YIELDS rates rise). For 2018, this pair-
barely budged, and real ON MANY CLASSES OF BONDS ing has returned about 3%.
estate investment trusts AND BLUE-CHIP STOCKS. As for stocks, advisers are
kept rallying. And although concerned that you may have
economic and monetary too much in your portfolio after
stress is spreading, another year of good gains.
investor harm year after year of solid AMG Funds’ Kevin Cooper, a point
has so far been returns in bonds and man between fund investors and finan-
limited to suf- real estate. cial advisers, says an investor with
fering or un- But no investment 65% U.S. stocks at the start of the
stable places is powerful enough bull market is now crowding 80%,
such as Argen- to avoid losses which he thinks is too high. I agree.
tina, Brazil forever. For the To downsize from 80% stocks to
and Turkey first time in 60% doesn’t mean you’re expecting
(for more, see years, cash ac- a crash or that a bear market is im-
counts paying
“How to Navi- 2% are compet- minent. But if you’ve made a pile of
money in a long-running bull market,
gate Emerging
POON WATCHARA-AMPHAIWAN Markets,” on classes of bonds and you have a chance now to trim the
itive with many
winners and patiently await the next
page 59). Such
opportunities. (For more, see “What’s
with the dividend
iffy markets de-
yield on blue-chip
serve only the
Your Next Move?” on page 48.) ■
stocks. That’s an
lightest presence
JEFF KOSNETT IS EDITOR OF KIPLINGER’S INVESTING FOR INCOME.
anyway in a low-
incentive, or at
YOU CAN CONTACT HIM AT JKOSNETT@KIPLINGER.COM.
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