Upon reallocation, we'd buy fewer US "regular" bonds and select instead foreign bonds where the central banks are lowering rates rather than raising them...

Hi, Ms. Hayden. When I talk about commodities, I mean the actual futures market. That's where I think those of us not "in the business" are babes in the woods and the woods are filled with very capable beasts!

The food STOCKS, however, are often wonderful investments for individuals. KO is a great example. It has long held a franchise on a sugary concoction that people either enjoy as a small pleasure, a guilty pleasure or as the bane of dentists everywhere! When it hits rough spots, as it did recently, many take the stock's decline as an opportunity to buy what is considered a defensive consumer discretionary company. Another example we like is Tyson Foods (TSN,) the huge chicken, beef and pork company.

My only caveat with any "defensive" stock is that, in a serious decline, there is no such thing. When the market goes into bear mode, no stock is immune!

I believe they are eminently reasonable choices for an individual investor. All have sufficient liquidity to ensure that individuals can buy or sell without fear of increasing the bid/ask spread and all are diversified enough in their holdings so a difficult time for any one position won't severely impact the rest of the portfolio. Our clients are all individual investors or small family foundations and I find these holdings appropriate for them.

Sure -- once you've paid the buy commission and dealt with any bid/ask spread, there should be no expense in holding an equity until you pay a commission to sell and deal with any bid/ask spread on the sale.

With an ETF, closed-end or open end mutual fund, you will pay for the managers' offices, cars and other perks in the form of "expenses." However...

What you are also paying for is their closeness to the markets -- they are watching it daily so if some untoward news item is rumored or hits, they can, respectively, place trailing stops or sell quickly. And, to your point above, they offer diversification within the bounds of their charter. If you then decide to build a portfolio that includes funds from different sectors and asset classes, you effectively hire these fund managers to do what you intend, be it the kids' education in 7 years, retirement in 30 years, etc.

Never be penny-wise and pound-foolish. Rather than see an Enron blow up in your face, it may well pay these expenses you wouldn't pay with individual stocks in order to gain diversification and the satisfaction of not having to watch everything yourself.

Hello again, Ms Brown!

I specify ETFs and funds because that's 85-90% of what we manage for our clients and suggest readers consider as part of their own 'Lifetime' portfolios. But among the great multinationals in Europe I certainly would consider Nestle, Anheuser Busch InBev, Unilever, Daimler (Mercedes' parent,) Siemens, Bayer, LOreal, BMW, LVMH Moet Hennessy and SAP...

Ms. Hunt is correct that you can find the chart on our website HOWEVER -- I am so glad she said that because (a) the website *I* got it from was credited in the original but did not make the journey when it was cut and pasted into our website. Thank you, Ms Hunt. I've now given credit where credit is due. And (b) you can now see the updated version, which includes all of 2014, on our site.

First of all, Ms VV, let me say: What a great handle, go-by or whatever it is we call the way we identify ourselves on TalkMarkets! "Vintage Vixen" is very clever. (And... do you know if anyone ever told Audrey Hepburn she looks an awful lot like you?)

The answer to your question, as you probably noticed in my answer to Ms. Edwards, is that we absolutely take the investor's age into account. But age is actually only one factor. Each investor has their own temperament, goals, risk tolerance, drawdown instructions, time they want to devote to the market, assets, etc.

I had an 89-year-old client I had to restrain from over-trading after I made him a good profit on an individual equity. He insisted I sell it even though I thought it still had a bright future. When I asked why he said, "I've never had a stock go up! I just want to take the trade tickets down and show the guys I golf with."

I've also worked with young people whose adult recollections of the markets begins in 2007 as real estate begins to slide, then 2008 when their parents lost hugely, etc. They are often TOO cautious, so I show them the long term trendlines. I post the 144 year trendline of the S&P and its precursor in our monthly investment letter, and point out to these young and cautious that they likely have another 40 or more years ahead of them -- "Let time and compounding work for you!" I tell them.

Absolutely, Ms. Brown! I think low cost ETFs, closed-ends and no-load, no transaction fee mutual funds are the only way to gain broad diversification across asset classes without spending 1.7 zillion dollars in commissions and such. I promise to give some concrete examples in part 2.

PS -- because there is always some individual security that grabs our attention, has a great story or really does warrant our consideration, I typically do strategic asset allocation with 90% of our client portfolios, and keep ~10% in cash or stocks a client cares about or stocks I believe are most appropriate for them. I do the same and indulge my desire to play a little bit -- with a little bit of the total portfolio.

Thank you for your comment, Ms. Edwards. Actually, we do NOT reallocate YOY! As I said above "Rebalancing based on the calendar is folly... Macro-trends evidence themselves any time of the year; both black and white swans swoop and dive based upon events, not calendars. We take action when our asset allocation percentages diverge from our intended allocation."

"What if" part of our strategic asset allocation had been to keep x% in something stable like, say, the Swiss franc? (It isn't but we're saying "what if?") Would we wait a year to reallocate? Not only no, but uh-uhh...The ripples from this action are still being felt in a number of asset classes, so we reallocate as one class becomes considerably over- or under-weighted or (the puritans of MPT are now shuddering in their ivory towers) when we believe a macro geopolitical event can "change everything."

Each of our clients has different goals, temperaments, risk tolerance, drawdown parameters, etc., so it is meaningless to say where REITs are in "a" 2015 portfolio. I will tell you, instead, where they register for me personally. In my portfolio, REITs currently comprise an outsize 12%. It was 7% previously and kept growing. But right now I believe the small caps, laggards last year, will do well so I have specifically added a more speculative, lower-volume-than-I'd-like ETF comprised of both small cap REITs and small cap real estate companies.