“When the autumn weather … turns leaves to flame; One hasn’t got time … for the waiting game. Oh, the days dwindle down … to a precious few … September … November …” — from “September Song” as performed by Willie Nelson
Sixty is the new 40. At least that’s my impression after taking a trip recently with a few ladies over the age of 60 (myself included).
What I found so exciting and invigorating about traveling with this group wasn’t their overall level of physical fitness, though that was impressive. (We walked a few miles a day through the streets of London and in the English countryside.) The quality that I admired the most was their mental flexibility. Change of plans? No problem! Missed the plane? I’ll just pull out my iPhone and book a replacement flight. Before we even returned from the trip, one gal said “So where to next, ladies?”
Millennials sometimes complain that us Boomers are stuck in our ways and are, well, curmudgeons. But I see lots of flexibility and can-do attitude in our age group. You can't stop these girls!
This mental dexterity and willingness to change is often on display when changing circumstances require older investors to rethink their investment strategies. The “traditional” allocation of 60% in stocks and 40% in bonds is being reevaluated in many portfolios. Millions of older investors are exploring different allocations, and doing so with an open mind.
Simply put, bonds (the 40% in the 60/40 traditional allocation) currently don’t pay much and don't appear likely to grow in value anytime soon either.
Now, to be clear, holding bonds that return three percent in a portfolio may be perfectly appropriate for some investors. This column does not offer individual investment advice, and should not be taken as such. We don't know your age, your risk tolerance or your financial goals. In some cases a three percent return on fixed instruments may be completely satisfactory for an investor. And if that's the case, holding bonds in a portfolio may make perfect sense.
That said, some investors (read retirees) can’t afford to have more than a third of their nest egg hibernating and only bringing home three percent per year. So many investors are turning to infrastructure investments in lieu of traditional bond holdings.
Infrastructure holdings tend to be long-term investments with stable cash flows. And what makes bonds less attractive lately for many investors (low interest rates with little chance of higher rates any time soon) is also what makes infrastructure investments increasingly appealing. When you can finance critical projects like fiber optic cable, natural gas pipelines, renewables plants and cell phone towers at ultra-low interest rates, it makes the cash flows those investments produce that much more attractive.
Granted, most types of equities, infrastructure investments included, are more volatile than bonds. That comes with the territory of investing in equities. But many retirees are planning for multiple decades of Italian tours and wine tastings in France. Why shouldn’t they match the duration of their investments with their own investing horizon?
Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.