Stock funds. Hold 'em or fold 'em?

bm

At 63 I'd be thinking about fixed interest.

Money market, debenture stocks, term deposit, Government bonds.

At least some form of capital guaranteed investment.

Interest rates are climbing in Aust (supposedly) because of a credit squeeze and increased cost of borrowing due to reduced money supply overseas.

liquidity is important at your age. I continue to buy 6 month reverse convertible notes but that's a bit on the risk side. Money market funds probably a good way to go.

Un huh. Interest is kind of low right now, but low looks better than the declines I've seen in the past 6 months, or thereabouts. I'm kind of leaning in that direction. Anyway, within the 401k, interest and any other kind of income continues to be deferred.

At 63 you probably don't want to move completely out of stocks, even growth stocks - but you should balance your portfolio back to a level where your risk is less. How heavy (percentage-wise) is heavy?

Right now, about 85% stocks & 15% mmkt.

I set the initial deferrals to those percentages. The funds invested in stocks did better than the mmkt, but that trend has definately reversed. At the moment, the stocks have a greater overall performance, but they're losing their edge.

Right, funds invested in stocks do perform better over the long run, but as you approach retirement age you should probably pull back to a more tolerable risk level. There are plenty of age-risk ratio recommendations out there. One is 25% - 75% stocks to bonds/income as you approach retirement (five years or less) moving down to 10%-90% or even 5%-95% after retirement. Even at 25% you can stand to weather a downturn/recovery cycle so long as you aren't withdrawing those funds and have the remainder of your portfolio to fall back on.

I don't know that there is a single magic portfolio spread for your age, years to retirement, and risk aversion but I agree that 85%-15% is heavily weighted in stocks for someone looking to retire in the next 5 years or less.