Ask an Advisor: I’m 69 With $370k in Equities, But I’m ‘Getting Nervous’ About the Stock Market. What Should I Do?

I am a healthy, active 69-year-old with $370,000 in equities but I’m getting nervous that stocks are overvalued. My portfolio has no bonds. I am interviewing financial planners but due to a negative experience with a firm a few years ago, I am having a hard time trusting anyone else with my hard-won savings. What is the best DIY way to create a bucket strategy using index funds? Or what is your advice for finding an advisor. I love to talk about money!

– Cynthia

A 100% allocation to equities is certainly an aggressive position. That’s true whether you believe the market is overvalued or not, so I understand your concern. I also think you’re going in the right direction in regard to index investing, whether you do it yourself or use an advisor. I’m happy to give you my thoughts on both how to do it yourself and where an advisor might come into play.

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Your entire portfolio in equities

You’ve mentioned that having all of your money invested in equities is making you nervous. Yes, this is far outside a standard allocation range for a 69-year-old. You would likely benefit from dialing this back. Two points in particular are worth mentioning.

First, you’re better off evaluating your investments through the lens of your financial plan as opposed to whether you think the market is overvalued. That means thinking about your goals, time horizon and risk profile. Then consider how market fluctuations and return expectations could affect your ability to meet those goals. Your goals and risk profile should drive your asset allocation choice.

Second, when thinking about your portfolio in the context of your total financial plan, you may find that your equity allocation makes sense after all. If you can cover your expenses with fixed sources of income like Social Security, pensions or annuities, the equity volatility may not pose as much of a risk. If you aren’t relying on this money for regular withdrawals, you may be able to justify a higher stock allocation depending on your goals and risk tolerance.

I’m not suggesting a 100% equity allocation is the right path for you. I’m only presenting this hypothetical scenario to illustrate how and when an all-equity portfolio may be appropriate.

Your reality likely isn’t that extreme, however. You may need to take regular withdrawals to cover at least a portion of your ordinary living expenses. Ultimately, this is a conversation to have with an advisor. (And if you need help finding an advisor, connect with your advisor matches today.)

DIY Investing Solutions

I think most of the major financial institutions are good choices for individuals who want to handle their own investments. That’s especially true if you aren’t doing anything too complex. Before you open an account at a brokerage, check to make sure that it offers the types of products and services you need. Fortunately, index funds are quite popular so you shouldn’t have any trouble.

You should also consider the fees and expenses. Most firms now allow commission-free trading of stocks and exchange-traded funds (ETFs), many of which track indexes. You may still face charges for mutual fund orders, though. Just ask each brokerage firm what the fee would be for the funds you want to invest in.

Lastly, evaluate the user interface to make sure you are comfortable navigating the platform. That’s a matter of preference though. (Even if you’re a DIY investor, consider speaking with an advisor about how to potentially improve your portfolio.)

Talk It Over With a Pro

If you’re unsure about the tax implications of your investment moves, hold off on major changes. Talk to an advisor first, if that’s still your plan.

I can’t recall a single time when I have been glad someone triggered a tax consequence by acting before they spoke to me. “I’ve often been disappointed when someone made a tax-impacting decision without speaking to me first. It’s especially unfortunate if we can’t undo the damage, which is often the case. If your $370,000 is in a retirement account, this likely isn’t a concern for you. You can reallocate your investments without generating a tax liability. Just don’t withdraw them from your account before you understand the tax consequences of the withdrawal.

If you are comfortable with the tax implications of your investment decisions, then I think you can go ahead and re-allocate to a more moderate balance. Another option is to use protective puts to buy yourself a little time. This would offer some protection from a potential downturn while you continue your search for an advisor. (And if you’re ready to hire an advisor but don’t know where to start, this free matching tool can help you get the process started.)

Bottom Line

A 100% stock portfolio is quite aggressive, especially for a 69-year-old. However, the right allocation is a function of your financial circumstances and plan. If you want to reallocate your investments before settling on an advisor, just be mindful of the tax implications. Otherwise, I think it’s a good idea to consider your plan for the money. Then, you can realign your investments to an allocation that fits you better.

Tips for Finding a Financial Advisor

A lot should go into your decision to hire a financial advisor, including your specific needs, how much you have to invest and how much you’re willing to pay for advice. To help you in your search, we’ve compiled a comprehensive guide on how to find and choose a financial advisor. This explainer breaks down what you need to know about hiring an advisor, including how to research advisory firms and pitfalls to avoid.
Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.