Morningstar makeover confirms I need to keep leaning on stocks

Normally when I’m offered a free portfolio makeover, it comes in the form of a glossy postcard promising brilliant insights over a chicken dinner during a half-day seminar hosted by some local financial planner trolling for new clients.

But when the invitation comes from Christine Benz, director of personal finance at Morningstar, that represents a whole different kind of opportunity.

While Benz didn’t promise or provide any food or other enticements, she did offer something any self-respecting retirement saver would jump at: an opportunity to find out if I’m on the right track or if I’ll need to develop a taste for off-brand cat food in retirement.

The short answer is, I probably won’t have to eat cat food as long as I continue saving and investing at my current rate and don’t radically alter my spending habits. This is welcome news to someone who has only been ballparking retirement income to this point, but it also underscores for me how valuable these kinds of investment checkups can be.

As a veteran financial journalist who spends his days researching, interviewing, and writing about investment products and strategies, I confess to mostly winging it when it comes to my personal investments.

And, as Benz pointed out in her review of my portfolio, it is messier than it should be. That was the first lesson.

Like a lot of self-directed investors, I have found myself wandering down a few rabbit holes in search of how a certain investment strategy might work, but I have mostly kept on track by avoiding unnecessary debt, investing as much as I can afford and trusting the power of compounding, especially during volatile times.

Benz, who I’ve known professionally for years, tweaked her decade-long routine of not specifically identifying the portfolio makeover subjects by getting me to spill my guts for the whole world to see.

If I had any reluctance about sharing my personal net worth, it was only exacerbated by the way Benz kept asking if I was “absolutely sure” I wanted to do this.

Aside from the fact I had already said I would, I figured I could bank it as a favor that Benz would owe me at some point in the future because it’s better to be owed than to owe.

That was the second lesson.

If you read the profile Benz wrote or watch our video conversation, you’ll recognize a push by the Morningstar makeover expert toward streamlining and simplification.

“Most people bring a lot of plain-vanilla funds to the party, but your portfolio was a little more unique,” she put it politely.

Aside from her suggestion that I trim some of the gold allocation, at about 5% of my portfolio, I’m pretty much following her advice.

I’ve cleaned up the mess a bit and am now in the process of getting a will and trust written, and I’m at least looking into long-term care insurance for me and my wife.

Along those lines, I should mention the Morningstar profile has already caught the attention of two different representatives eager to satisfy my long-term care insurance needs. We’ll see how that goes.

Across the five portfolio makeovers Benz did this year, she acknowledged a theme of heavy allocations to equity with not enough international exposure.

Guilty, as charged, on both counts.

We agreed that my 70% equity weighting, like my 5% allocation to gold, probably runs counter to traditional financial planning principles.

But when fixed income is giving you nothing and cash is giving you less than nothing relative to inflation, it somehow feels like the biggest risk over at least the medium term is in the so-called safest corners of the market.

Ultimately, it’s all about what enables you to sleep at night. For me, that means staying aggressive while saving more, spending less and checking on the portfolio balance as infrequently as possible.

That’s the third lesson.

Related Topics: Morningstar Inc., Portfolio Management