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Find the Right Investments for Your Retirement Portfolio

How best to populate your retirement portfolio? How to decide which of your current holdings are a good fit?

Christine Benz 20.12.2017

How best to populate your retirement portfolio, or decide which of your current holdings are a good fit? To help you knock those tasks off your list, it's crucial to think through your own situation, what you're trying to achieve, and your characteristics as an investor. As you do so, here are the key questions to ask.

Question 1: Will you employ multi-asset funds or discrete holdings for your stock and bond exposure?

This is one of the first forks in the road that confront many investors saving for retirement: Hand-select investments, or opt for an all-in-one vehicle that encompasses varying asset classes, such as an allocation or target-date fund? Here are the pros and cons of each tack.

Employ discrete stock, bond, and other holdings.

Pros: The big advantage of using a building-block approach versus employing an allocation or target-date fund for your retirement portfolio is that you can exert tighter control over your asset allocation. You can customize your stock/bond mix to suit your own situation. Some investors may also value the ability to make tactical adjustments to their asset allocations based on their market outlooks--raising cash when long-term assets seem expensive, for example. And while multi-asset funds will typically assemble a portfolio from the "house" brand of mutual funds, the investor who maintains discrete stock/bond holdings is free to graze across fund families. Finally, retirees who maintain discrete stock/bond holdings can also be strategic about which part of the portfolio they tap for living expenses; they can sell stocks in a lofty market, for example, while harvesting bond and cash assets in tough equity markets.

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About Author

Christine Benz  Christine Benz is Morningstar's director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. Follow Christine on Twitter: @christine_benz and on Facebook.

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