Fix your portfolio

Now that the wreck of 2008 is over, here's how to put the pieces back together - no matter what kind of investor you are.

3 of 3
Scenario 3: You went too risky near retirement
Scenario 3: You went too risky near retirement
Target allocation: If you're around retirement age, you can't take much risk - and you'll need income. The solution: Tuck half your portfolio into bonds and add cash as the years pass.
Problem: Retirement is close at hand, and the pounding you took in 2008 proved you can't stomach the risks you once could. (Before the downturn, 40% of 401(k) investors ages 56 to 65 had 80% of their money in equities, according to the Employee Benefit Research Institute.) But you worry that if you cut back on stocks, your nest egg won't recover or provide the growth you'll need in retirement.

Losses last year: 18% to 35%

Goal now: You want to reduce risk without giving up on growth entirely. And you need a steady stream of income.

How to get there: Reduce your equity stake. The hideous market may have already done the work for you: If you had a 60% stock allocation a year ago, it is probably more like 50% now. Consider the asset mix at right. It will kick off more income than you may think. That's because as prices for high-quality bonds and stocks have tanked, yields have climbed. Dividend-paying stock funds, for example, are yielding 2.5% to 4%. Add it all up and a mix of 45% stocks, 5% REITs and 50% bonds might give you a yield of 4.5%.

As you get older, make sure you've added some cash to this mix - you'll get a better cushion against market downturns. Mari Adam, a financial adviser in Boca Raton, Fla., suggests a one-year CD: Some are paying 3.5% or more.

More galleries
Last updated January 14 2009: 6:15 AM ET
More Galleries
8 great summer vacation deals Want the perfect summer getaway? MONEY searched for destinations with balmy weather, unique attractions, fun stuff to do, and great deals from four different categories: beach, mountain, culture and city. More
Best ways to catch up on your retirement savings Even the most financially responsible people make a few mistakes or run into obstacles along the way. These tips -- from cutting taxes to selling securities -- can preserve a safe retirement. More
Nearing retirement? Fortify your finances Your financial goals are within reach. Here are tips and tools to make sure you achieve them. More

Special Offer

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.