Portfolio IQ: Trusting 70% Stocks and 30% Bonds
Chris Chen is coasting toward retirement with his ‘all-weather portfolio.’
Chris Chen isn’t trying to knock the cover off the ball with his personal investment portfolio, but he also isn’t afraid to swing hard at a few risky pitches.
Chen, a 63-year-old wealth strategist at Insight Financial Strategists in Newton, Massachusetts, represents the latest installment of Portfolio IQ, our look inside the investment strategies of folks who get paid to build portfolios for others.
The basic breakdown of 70% equities and 30% fixed income is a model Chen has followed for years and plans to stick with until he gets closer to retirement, which is not currently pegged to a specific date, he said.
Chen is part of a double-income household, and he said his wife is the more risk averse of the couple, which has an impact on how the portfolio is allocated.
SPLG Core, All-ETF Portfolio
The largest position in the all-ETF portfolio is the SPDR Portfolio S&P 500 ETF (SPLG) at 30%, followed by the Schwab International Equity ETF (SCHF) at just over 15%.
The portfolio of indexed exchange-traded funds is roughly 43% weighted in U.S. stocks, 22% in non-U.S. stocks, 27% in fixed income, 5% in alternatives including gold and cryptocurrencies, and about 2% in cash.
Chen said if his portfolio looks similar to models one might see at brokerage firms or ETF platforms, that’s because he is essentially following the time-tested strategies that have become prevalent across financial services.
“Initially, I was looking at model portfolios from the big boys, and you could look at a State Street or Vanguard portfolio and it’s not very different from mine,” he said. “My portfolio is also similar to my client portfolios, because I figure if it’s good for me it’s good for them, and if it’s good for them, it’s gotta be good for me.”
Like any portfolio, whether it’s defined as aggressive, conservative or somewhere in between, there are pockets of exposure that require a strong faith.
In Chen’s case, it’s found in international exposure, generally, and emerging markets, specifically.
By geographic region, the equity side of the portfolio has a 68% weighting in the U.S. and a 17% weighting across developed and emerging Asian markets.
“The international and emerging markets take more intestinal fortitude,” he said. “But I believe there is a reversion to the mean, and it will happen at some point; I just don’t know when.”
Another area where Chen is stepping out on the plank a bit relates to his tiny 2.2% weighting in the SPDR S&P Homebuilders ETF (XHB).
“I added that at the end of 2023 because we were supposed to be facing a housing crisis,” he said. “I think of it as a satellite position along with bitcoin and gold.”
Chen said he is still at least seven years away from retirement and plans to gradually reduce his equity exposure as he approaches age 70.
“Until then, I think I have an all-weather portfolio,” he said.