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May 6, 2012

May 6, 2012 Newsletter Excerpts  -  Editorial Comment ("EC") by David Korn:

Bob Brinker Fan Club Home Page  -  Bob Brinker's Asset Allocation History

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2012


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  This caller and his spouse are 75 years old and their asset allocation has only 14% in stocks, the remainder in bonds and cash. 

Bob suggested to the caller that 14% was a little “light” and was a very small number.  At age 75, you are going to be a balanced investor (meaning generally splitting your portfolio between stocks and bonds).  In a balanced portfolio, Bob said he would use a bottom number of 30% in the equity market.  Bob specifically said that as of May 2012, if he were in their shoes, he would have 30% of their portfolio in the equity market and you could easily do that by including a balanced fund.

Kirk Here:  This is a HUGE change for Brinker.  I remember a caller to his show near the 2007 bull market highs before the last two bear markets was in Brinker's "Balanced" Model Portfolio #3 which was 2/3rds in equities.  The caller asked Bob if they should re-balance this portfolio back to 50% equities and 50% fixed and Brinker was adamant that this was not his advice.  This could be a good "contrarian indicator" that permabull Brinker is now far less bullish on stocks then he was at the peak in 2007.  For more, read
Bob noted that Vanguard has a fund called the Vanguard Balanced Fund that is a simple and low cost way to include that kind of thing in your portfolio.

EC (David Korn):  :  A couple of things here.  First, when Bob is bullish on the market (as he clearly is these days), he is much more comfortable recommending higher percentages of equities in a portfolio.  Recently, Bob referenced a range of 30% to 70% stocks for someone in the “balanced” phase of their investment years.  The fact that Bob recommended to a 75-year old couple that they increase their equity position by over 50% (from 14% to 30%), reflects his confidence in the stock market at his point in my opinion.  He has also recently said he was comfortable with a person a little younger, but still in their retirement years, having 65% of their portfolio in stocks at this time.

  The Vanguard Balanced Index Fund (Ticker: VBINX) invests about 60% in stocks and 40% in bonds with an expense ratio of 0.24%.  As far as I know, Bob doesn’t currently recommend this fund in his Model Portfolios.
  I was a little surprised that he recommended it to this caller, as if the caller wanted to increase his stock holdings, he could simply add some of the Vanguard Total Stock Market Index Fund or the S&P 500 Fund.  Nothing wrong with the Vanguard Balanced Index Fund though.  It is pretty straightforward way to create a balanced portfolio without getting fancy.

Kirk Here:  There is a cheaper and easier way to add equities to your portfolio.  Without moving money to Vanguard or paying a broker to buy Vanguard funds, you can simply use the money in fixed income you wish to allocate to equities to buy VTI which is Vanguard's Total Stock Market ETF.   The annual expense ratio is ONLY 0.06%!  If you are happy with your fixed income in CDs and other fixed investments with NO annual expenses, then why pay Vanguard or anyone else a fee to manage fixed income?  Pay them only for the money in VTI which is an industry low.  You can buy VTI at any discount broker, usually for a small commission.  If you move enough money to some brokers, such as Fidelity, then they give you free trades so you can actually buy the fund for commission free!

Overview from Vanguard:  "Product Summary: Invests in more than 3,000 stocks representative of the whole U.S. market.  Goal is to keep pace with U.S. stock market returns. Offers high potential for investment growth; share value typically rises and falls more sharply than that of funds holding bonds.  More appropriate for long-term goals where your money’s growth is essential." 

VTI - Vanguard Total Stock Market ETF
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Kirk Here:  My explore portfolio is off to a great start!  With 2/3rds in equities and 1/3 in fixed income it is Up 11.3% YTD as of 3/31/12!!!  The DJIA is up 8.1%!  What a great start to 2012!!!

Long Term Results that Speak for Themselves
Since 9/30/98 inception, "Kirk's Newsletter Explore Portfolio" is UP 390%
vs. the S&P500 UP only 51% vs. NASDAQ UP only 57% (All through 12/31/11
Subscribe NOW and get the May 2012 Issue for FREE!  
(Your 1 year, 12 issue subscription will start with next month's issue.)
(More Info, Testimonials & Portfolio Returns)

Kirk Here:  David and I are very proud of our performance for "The Retirement Advisor:"  Note how our "most conservative portfolio, with zero stock market exposure, made money every year.  The Brinkers can's say that about ANY of their "income portfolios" in either of their two newsletters.
The Retirement Advisor Portfolio Performance By Year Through December 31, 2011
Model Portfolio 2011
2010 2009 2008 2007 Combined
#1: Aggressive 0.5% 10.9% 19.7% (18.2%) 9.5% 19.5%
#2: Moderate Risk 2.2% 8.4% 13.2% (8.7%) 8.5% 24.1%
#3: Conservative 4.8% 5.5% 5.5% 3.7% 8.3% 31.1%
CLICK HERE to download a FREE issue of "The Retirement Advisor."
 Website for more information and annual Performance Data

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