Question:

I am trying to manage the risk in my portfolio following your suggestions. I chose a 60 percent equity portfolio, since I think that is about right for me. But as the value of my equity funds has fallen, the equity/fixed-income ratio and asset class percentages have become quite distorted from my original plan.

Instead of 60/40, I’ve now got a 45/55 portfolio. Since equity prices have fallen so much, I have decided to move some of my fixed-income holdings into equity funds. (I have also rebalanced the asset classes within my equities.) If the market keeps dropping, I’m planning to convert another 5 percent to 10 percent of my fixed-income funds into equities.

This is very painful; it feels as if I am putting more of my money at risk. But I no longer contribute to my IRA and this rebalancing process is the only other way I know to “buy low.” I have faith that these moves will eventually pay off when the market begins recovering. I will have more equity shares, bought at a lower average cost, and that should enable me to recover faster.

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Question:

I’m a healthy, 60-year-old woman, still working, with a modest retirement portfolio worth about $40,000. I will soon receive a lump-sum tax-free pension settlement worth about $25,000. After I max out my Roth IRA for 2008 and 2009 and pay off some credit cards, I’ll have about $10,000 left. I intend to keep this as an emergency fund, though I don’t think I will need it in the future. How should I invest this money to keep it growing but also protected from a major loss? Bond funds? Certificates of deposit?

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Question:
For more than 35 years, we investors have enjoyed the benefits of a rising stock market. Most advisors are committed to the buy-and-hold approach, discouraging people from selling their holdings during a slump because the market has always come back in the past. For many people, that is all they have ever known. However, the major indexes are down 20 percent or more from the October 2007 peak. Some analysts think the market will go down a lot further. My question is what if - just what if - that "rising tide" of the past 35 years becomes a "falling tide" lasting who knows how long? If that happens, all portfolios - lazy or not - will be severely stressed. In my case, all my holdings are in cash, where no losses are allowed. As a retiree, I don't have time to recover. In these times, the best gain is not having a loss. Your suggestions, please, on money management to produce a return that will beat cash with no losses. Is this possible?
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Question:
My brother-in-law and I have both attended your workshop. We want to be exposed, as you have suggested, to all corners of the market: micro to macro. He has been investigating Fischer Investments, and the question came up about fees that Fisher would charge. My contention is that with Merriman, the total charge is the maximum 1  to 1.5 percent per year on the total value of the account and there is no additional expense charged from each of the DFA funds in the portfolio. My brother-in-law says that all mutual funds, even index-like funds, charge continuing expenses. Who is correct here?
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Question:
I currently have allocated my retirement funds to your Vanguard buy and hold strategy as listed on your website. I have half of the allocation in DFA Funds as I noticed  that some of the Vanguard Funds have performed better over the 5 year period as compared to the DFA ones so that is why I have a combination of the 2 fund families making up the entire suggested investment plan.  I do pay a management fee for the whole portfolio though as all the assets are under the advisors care and maintenance. In your opinion is this a winning strategy to invest in the best performing asset classes from each fund family?
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Question:
For many years I have heard standard advice to keep three to six months of living expenses in cash. Now with the markets taking a dive, I am hearing advisors recommending one year of cash as a minimum. Then I read somebody’s advice to keep 18 months, and another advisor said he keeps two years worth of cash for all his clients. (I wonder just when he started doing that and how long it will last if the market starts booming again.) Is this really the right thing to do? Or do these advisors just find it impossible to find good investments for all that money and are taking the easy way out? I have heard some of these same advisors complain about mutual fund managers keeping money in cash and not staying fully invested. What do you think?
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