I am a government employee. I am invested in my 457 and 401 (a) as follows:
25% High Yield Bond Fund (TIAA CREF)
25% Pimco Total Return
25% Putnam Stable Value - returning around 2% currently (considered cash portion of portfolio)
25% DFA Inflation Protected Securities
I have a Roth IRA that is 100% TIPS
I am 52 years old. Was 100% Stock funds ages 22 until July of 2007. I had a nervous feeling about the market and went to cash and bonds. The market topped in October of 2007 and then my funds that I had dropped 40%. I side stepped that loss. I know some of you will say had I stayed the course I would have recovered. I lost 40% in the Tech Wreck and it took me until 2005 to make it back and I do not want another ride on the roller coaster.
Now I am basically 80% bond funds and 20% cash. I understand when interest rates rise bond funds will fall. I have been reading Money Magazine for 30 years but beyond that I don't have a financial education. Last month Money had an article about bond funds that was basically "Don't worry, stay the course, you might be risking 5% but market timing never works and going all cash is not the right choice. Even if you dip a little it will come back, so just stay invested." Through the years I have seen "Money" make some really bad calls, so don't trust everything I read in it.
Then I get on the Internet and read articles from people I don't know (meaning should I trust them?) who are saying, get out of bonds NOW, you are risking a 30% drop. Having lived through the Tech Wreck, again I don't want the roller coaster ride of 30 - 40% drops. I can handle 5% dips as long as the money comes back.
I feel I have done great since getting out of stocks in 2007 averaging 5 - 8% per year. I save 15% of what I earn. I will retire in 5 years with a 50% pension and will need this money eventually so don't want to risk principle. Not interested in the stock market anymore. It was so fun in the 1990s (20% - 30% returns were fun!) but now it feels like a giant casino to me and I don't gamble when I am in Vegas. Losing even $20 to me is not fun.
So my question boils down to this...Do I stay the course, or am I taking on too much risk? Considering I hate losing money?