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Q: I’m risk averse, so I’m fully invested in the “F” Fund in the Federal Thrift Savings Plan.

It is supposed to mirror the index for U.S. bonds and has done OK.

Recently I saw John Bogle on CNBC. He said you should always have at least 30 percent in stocks.

He also said there was an 85 percent chance of stocks outperforming bonds over the next 10 years.

So, could I do slightly better with a 30/70 split in my thrift plan?

A: Owning some amount of equities, even for the most conservative investor, is a good idea.

Ibbotson research shows that the longer the holding period, the greater the probability stocks will return more than any type of fixed-income investment.

The same research shows that small-company stocks will provide higher return, more of the time, than large-company stocks.

Rather than deciding between a mix of large-company and small-company stocks, you could consider one of the Lifecycle fund options offered by the Thrift Savings Plan.

The “L” Income Fund, for instance, is 80 percent fixed-income and 20 percent equities — but it mixes 12 percent large stocks, 3 percent small stocks and 5 percent international stocks.

Similarly, the L 2020 Fund is about 45 percent fixed-income and 55 percent equities, with 29.45 percent in large stocks, 9.4 percent in small stocks and 16.4 percent in international stocks.

If you chose to mix them equally, the resulting portfolio would be about 60 percent fixed-income and 40 percent equities.


Copyright, 2013 Universal Press Syndicate