Constructing the Value Investor’s Portfolio: Allocation Between Stocks and Bonds

When constructing a portfolio, the value investor must consider what percentage to invest in stocks versus bonds. Generally, this choice will affect the level of risk in the portfolio and must be made in consideration to the market’s current environment.  In this episode of the ModernGraham show, learn more about what Benjamin Graham encouraged Intelligent Investors to do in this regard, and find out how I approach the issue with my portfolio.

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2 responses to “Constructing the Value Investor’s Portfolio: Allocation Between Stocks and Bonds”

  1. Vinny LaBash Avatar
    Vinny LaBash

    What does one do when the current market conditions strongly indicate that both stocks and bonds are very overvalued?

    My solution has been to divest my portfolio of extremely low return bonds. One critic has said that Treasuries have turned from “risk free return” to “return free risk”.

    I have almost 100% of my current portfolio in dividend paying stocks, and I increase yield by selling out of the money covered calls, and out of the money puts to accumulate new shares if a downturn occurs.

    This reduces my costs in picking up new shares and increases my dividend yield by buying shares at a reduced price. In addition if the puts I sold expire without a stock purchase, I sell more puts.

    I understand that this is one of many possible ways to manage a portfolio, but this approach has the advantage of increasing yield while reducing overall risk.

  2. Paul D. Avatar
    Paul D.

    What would Graham say today with current interest rates? %’s are an ok rule of thumb! But if bonds are a bad deal stay away until they become more attractive. Here dividend paying stocks act like bonds and currently pay a better yield.

    Suggestion: consider a MG index portfolio. Using current market sectors which are more value investor. Then using ETF’s recommend a MG %ETF allocation both stocks and bonds.

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