Mitch's Mailbox

May 26th, 2022

Investing For Your Own Time Horizon


Dennis W. from Fall River, MA asks: Good Morning Mitch, I follow your column and a few others and often hear investors are best served to focus on the long-term. I understand the reasoning, but my problem is that I don’t have much time! I turn 75 next year, so “focusing on the long term” is not something I can afford to do. What are your thoughts?

Mitch’s Response:

I appreciate your candor and understand exactly what you’re saying. The older we get, the shorter our life expectancy becomes, and shorter life expectancies generally mean shorter investment time horizons. 

I think the best way to address your concern here is to focus on asset allocation. For example, a 30-year-old who is working and trying to accumulate assets for retirement should be invested differently than a 75-year-old who doesn’t work and relies on portfolio withdrawals for income. The 30-year-old should have maximum exposure to equities relative to their risk tolerance, while the 75-year-old should have equity exposure that aligns with their risk tolerance, need for growth, and time horizon. In all likelihood, that means the 75-year-old will have less equity exposure than the 30-year-old.


How Can You Protect Your Retirement Assets During a Potential Bear Market?
Concerns surrounding the current state of the market are high. Many investors may be questioning how to manage their investments if the market reaches bear market territory.

You can potentially avoid the most harmful hazards of a bear by making use of some useful tools I offer in our free guide – The Zacks Bear Market Survival Kit.1

This guide discusses some key tools to prepare for a bear market, including:

In this guide, you’ll get our viewpoint on the most important moves you can make to weather a recession. Don’t wait—if you have $500,000 or more to invest, get this guide before the storm hits.
The Zacks Bear Market Survival Kit1


But that’s not always the case. Many people have goals and objectives that extend well beyond their lifetimes, something we see often in estate planning. If an investor is confident, they have financial security for life, and their goal is to pass assets to heirs, charities, foundations, etc., then the investment time horizon becomes much longer than life expectancy. Those assets are meant to work for the next 50 years, not 15 years. In these cases, focusing on the long-term would apply, even for a 75-year-old.

Let’s assume, however, that the assets in an investment portfolio are providing income for a retiree who expects to live for 10 years and does not have many estate planning goals. The asset allocation, in this case, should reflect a short time horizon and high-income need, which may mean having a higher fixed income allocation than equity allocation, and also a sizable cash buffer, perhaps 1-2 years’ worth of income needs.

Stocks have done well in most 10-year periods historically, but a relatively high fixed income allocation should temper the ups and downs and help smooth out returns over time. You should not expect to experience the same level of drawdown in your portfolio as you see in the market today, for instance, but you are also not likely to capture the full rebound on the upside.

Some readers may point out that stocks and bonds have been moving in lockstep in 2022, which may seem to nullify my previous point. Indeed, through the first quarter of 2022, the S&P 500 index was down roughly -13% while the Bloomberg U.S. Aggregate bond index—which is comprised mostly of U.S. Treasuries, mortgage-backed securities (the good kind), and investment-grade corporate bonds—had declined by -10%. Investors who rely on bonds and fixed income securities as a hedge against stock market volatility were understandably disappointed, and perhaps even a bit confused.

Does this mean bonds are no longer a good volatility hedge for the equity markets? Not in my view. I see this period as an anomaly, not a rule. The only other instance I can find when stocks and bonds declined significantly with a high correlation was in 1976. There was also a lockstep decline in 1994, but it was not earth-shattering – the S&P 500 fell 1.5% and bonds retreated 2.9%.2

“Focusing on the long term” does not necessarily mean the same thing for every investor. But in challenging times, I do think all investors should focus on their investment time horizon and remember that if your asset allocation is aligned with this horizon, and also aligned with your risk tolerance and growth/income needs, then volatility should not be feared or reacted to. It’s just part of the process. 

It’s important to remember that inflation and volatility are a natural (if unpleasant) part of the economic cycle. And for investors who are questioning if we are approaching or in a bear market, know that you can potentially avoid the most harmful hazards of one.

In our free guide, The Zacks Bear Market Survival Kit3, we provide key tools to help you prepare for a bear market, including:

If you have $500,000 or more to invest, get our free guide today. You’ll get our viewpoint on the most important moves you can make to weather a recession. Don’t wait—get this guide before the storm hits.


1 ZIM may amend or rescind the “The Zacks Bear Market Survival Kit.” guide for any reason and at ZIM’s discretion.

2 Wall Street Journal. May 3, 2022.

3 ZIM may amend or rescind the “The Zacks Bear Market Survival Kit.” guide for any reason and at ZIM’s discretion.


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