Boomer Exposure To Dividend Stocks Is Dangerous

With fixed income rates at historic lows, it is no surprise that baby boomers (those born between 1946 and 1964) have increased their exposure to equities (stocks and stock mutual funds).

While a small percentage of any portfolio should be investing in stocks (usually via growth mutual funds), the trend over the last few years has been to increase exposure.

A normal asset allocation rule of thumb is your age as a percentage in fixed income (bonds, CD's and money market) and the balance in equities.

Recently some folks are utilizing dividend paying stocks for the fixed income portion of the asset allocation (to increase income).  This is not a good idea and a disaster waiting to happen.  In the end, equities are equities, stocks are stocks and sure, those that pay a nice dividend are usually safer with more price stability but will never and should never be mistaken for fixed income.

If your financial adviser or stockbroker has messed with your allocation, you need to call me.  If you have done this to yourself because you heard somewhere it was a good idea, call me.  I am happy to help.

1 comment:

  1. I agree, all I see on TV is people touting dividend stocks as the answer.