So what might be the best strategy if you are a Calpers pensioner? The first thing you need is more complete information.
Go ahead and order the complete set of holdings. Hopefully they will break down the asset allocation in that filing. Asset allocation is crucial, because if you are middle-aged, getting the right balance is key. As for what actually is the right balance, that’s something you have to decide yourself based on your risk profile. There are many ways of determining that.
We certainly know that you need not invest in large cap stocks like AAPL, XOM, MSFT and the familiar names. No, my guess is you’ll need small-cap value and growth names, or exchange-traded funds for that exposure. You’ll need individual preferred stocks, which I think are better than the ETFs offered, and which I will discuss in The Liberty Portfolio.
These equity names and ETFs will expose you to a bit more risk, but I don’t think you need to plow tons of capital into those names. I think that otherwise, prudent choices in preferred stocks, baby bonds and some real estate investment trusts should pay off over the long term.
Lawrence Meyers is the CEO of PDL Capital, and manager of the forthcoming Liberty Portfolio stock newsletter. As of this writing, he has no position in any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.