In true Tortoise and the Hare like fashion from the old school fable …..
There’s a tug-of-war that goes on between the turtle and the hare…..
We all know the ending, although some endings have changed over the years, but stay with us for just a second, as we bring a financial parallel to our fable.
In our interesting story, bonds are the Tortoise and the Hare are Equities/stocks.
Why most need Tortoise/Bonds in their portfolios
Bonds are truly like the Tortoise as they’re more slow running, BUT also importantly, slow to lose value.
Equities/stocks carry Hare like returns that generally, over the longer term are faster, but in true Hare like fashion, can get really sidetracked at times (think October – December of 2018 Amateur hour time.)
Here is the Great News in our Story – You can do both!
The good news about investing, unlike the fable is that you don’t just have to be one or the other, but you can mix.
We would argue that mature (larger or for more mature folks) portfolios need a Tortoise for stability during bad times as well as the yummy income that bonds produce!
As the portfolio grows or the income needs rise, more Tortoise may be needed.
Early portfolios that have heavy contributions can frequently be all Hare/Equities/Stocks as the contributions making up a great percentage of the portfolio act like a stabilizing Tortoise.
Normal progressions may be 75% Hare, then 50% then 40% and 25% or less Hare are frequently ok …. with the remaining portions being Tortoise of course….
One of our favorites are 50/50 Hare to Tortoise ….
Another great part of having both in a portfolio is they tend to offset themselves naturally during bad times – when Hare/Equity/Stocks get smacked, almost inevitably Tortoise/Bonds have a field day – multiple reasons such as interest rates dropping when Equities rise and visa versa, as well as a Tortoise safe haven…
There are always unique situations such as all Tortoise due to immediate need or just dislike of volatility and all Hare when there are no needs for the future.
Look for a greater depth information in our coming Newsletter with possible follow up items and details here.
Needless to say we are fond of both the Hare and Tortoise.
Thanks for accommodating our juvenile humor!
Have a Great “Tortoise and the Hare” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth