Here at McCall & Associates, we’re big football fans. Steve grew up a Razorbacks fan, and Barry rides hard for the Vols. Personally, I bleed two toned blue (as an aside, Derrick Henry should be in the MVP conversation!). 

There are a lot of different ways to build a football team. Here are a few of my favorites:

• 2000 Baltimore Ravens: This team had one of the best defenses of all time. The Super Bowl champions allowed 9.4 points per game, best in the league

• 2013 Denver Broncos: They rewrote the record books. The Broncos scored 606 points during the regular season, averaging 10.1 points per game more than the next best team. Peyton Manning broke the single season record of passing yards and touchdown passes. 

While both teams were impressive, they were built very differently. The Ravens loaded up on defense and neglected offense to some degree. In fact, the Raven’s offense went 5 consecutive weeks without scoring a touchdown. The Broncos had an incredible offense, but were stymied by the Seahawks in the Super Bowl, losing 43-8.

The point is, there isn’t a perfect way to build an NFL team, just like there isn’t a perfect way to build a portfolio. 

Selecting investments is a balance of risk vs reward. That begs the question: Should you build your team like the Ravens and minimize the downside or like the Broncos and shoot for upside? Let’s dig in. 

Should my portfolio be 80% stocks / 20% bonds or 60% stocks / 40% bonds?

This is not a question about which allocation percentage will perform the best over the long-term. It’s more about how much risk an investor should take on in their portfolio. Instead of answering this question in general, let’s look at it during two phases. The building phase and the distribution phase.

The building phase for an investor is the accumulation of assets during your working years. Investors are compiling assets during this stage, needing their assets to grow for retirement. Due to the growth nature of this phase, we advise our clients to take on as much risk they are comfortable with to allow for the maximum amount of growth. If an investor is okay with the volatility that comes with a stock portfolio, it will historically allow for more growth before retirement. 

In contrast, the distribution phase happens when you enter retirement and begin to live off of your assets. When our clients reach this stage, we like to pull back their risk to reduce volatility in the portfolio. Even though interest rates are low, investment grade bonds offer a buoy during a stock market downturn. We operate off of a total return philosophy. Some investors view their performance solely based on interest and dividends. We account for those, as well as the growth of the investments. 

No matter the stage, the important thing to remember is that there isn’t a right or wrong allocation. Your asset allocation should be fluid throughout your investing life. This will allow you to take advantage of the current market.

The Bottom Line

The asset allocation of your portfolio should be a lot less about market strategy, and a lot more about risk tolerance. If a 60% stock/40% bond portfolio allows an investor to achieve their goals and aligns with their risk, that’s the right allocation. If an investor can stomach a little more risk, a 80% stock / 20% bond portfolio would be more applicable. 

Like an NFL GM, we can help build your portfolio based on your goals and desires. If your situation calls for a stellar defense, we have the ability to put that in place. We can also implement an offensive or balanced strategy if your situation calls for it. To get in touch with one of our advisors, click here. 

Any opinions are those of Austin Coley, CFP® and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.