One of the most common nicknames for your retirement portfolio is "nest egg," but in the realm of food metaphors, it might be better to think of it like a holiday feast. So many dishes, so many choices, and to be healthy, you need to pick a properly balanced meal -- but also one that suits your personal tastes. So how should one do that?
The answer comes under the heading "portfolio allocation," and it's the focus of this episode of Motley Fool Answers. Hosts Alison Southwick and Robert Brokamp go through a whole delicious dinner, from the large-cap turkey to the bread-and-butter bonds, explaining how large a share each ought to occupy in a properly diversified portfolio. But first, in their "What’s Up, Allison?" segment, they memorialize the scene-stealing life of infamous shareholder activist Evelyn Davis, a corporate gadfly who was never shy about taking on the stuffed shirts of the business world.
A full transcript follows the video.
This video was recorded on Nov. 20, 2018.
Alison Southwick: This is Motley Fool Answers! I'm Alison Southwick and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool.
Robert Brokamp: Happy almost Thanksgiving, Alison!
Southwick: Happy almost Thanksgiving! In today's episode we're going to load your plate with some delicious helpings of portfolio allocation in a tortured metaphor. We'll also talk about the remarkable antics of activist investor Evelyn Davis. All that and more on this week's episode of Motley Fool Answers.
Brokamp: So, Alison, what's up?
Southwick: Well, kind of some sad news. The world recently lost what Jena McGregor at The Washington Post called, "a theatrical but persistent thorn in the side of corporate executives," by which I mean Evelyn [Davis]. She was a colorful character and an indefatigable shareholder activist prior to her passing on November 4th, so let's take a look back on her life, shall we?
Brokamp: Let's do it!
Southwick: Were you familiar with her?
Brokamp: I've never heard the name before so I'm in for a treat, I think.
Southwick: Here we go. Evelyn Yvonne De Jong was born in 1929 in Amsterdam. She was the daughter of a neurologist father and a psychologist mother. She grew up, as she put it, on the wrong side of the Atlantic Ocean but the very right side of the track so, yes, they were wealthy. However, in 1942, while her father was lecturing in the United States, the Nazis arrested the family because they were half-Jewish and sent Evelyn, her mother, and her brother to a series of concentration camps, eventually in Czechoslovakia. She was there for quite a while.
After the war she ended up in the U.S. and started investing with the money she got from a divorce settlement and her father's will. She did pretty well and she started asking tough questions at shareholder meetings. In 1965 she started publishing her annual newsletter called "Highlights and Lowlights" of annual meetings with her views on business, politics, travel, and shareholder activism. As she proclaimed, "Institutional investors get treated like royalty, individual investors like peasants."
Brokamp: She was a real Fool! She was the original Fool!
Southwick: Well, let me tell you about some of the things she did and see if you aspire to this. According to The Washington Post, Evelyn would attend roughly 40 shareholder meetings a year crusading for many goals, including democratizing corporate governance. She would love to lambast errant CEOs and she admits to attracting attention to Evelyn Davis. She told People magazine in 1996 that advancing corporate democracy and educating her readers was not her sole mission or even her primary objective. "The main thing," she said, "is to keep my name out in front."
She loved to cause a scene at shareholder meetings, including stripping down to a bathing suit demanding the CEO, himself, come move the mic closer to her chair [and sure enough, the CEO got down on his hands and knees, unplugged the microphone, and moved it to where she wanted.] This kept coming up in articles. She wore hot pants to a shareholder meeting. I don't even know what hot pants are.
Brokamp: I was going to say. What are hot pants?
Southwick: But they are controversial. She wore a batman mask to ABC's shareholder meeting after they premiered the campy Batman show back in the '60s.
Brokamp: Was she supporting it or protesting it?
Southwick: I have no idea.
Brokamp: I hope supporting it.
Southwick: She wore an aluminum dress to a U.S. Steel meeting.
Southwick: She told Lee Iacocca he was fat. She also told someone else, "You're no threat to me. You're too fat." She informed the chairman of Citigroup that she had him by the "things" that people sometimes say they have men by.
Brokamp: Hm, interesting!
Southwick: She did all of this in front of shareholder meetings. Rooms of people. Rooms of, let's be honest, men in suits. Stuffy men in suits, who would jeer, sometimes cheer. Some of the issues she fought for were high CEO compensation, increased transparency, and ending the system of staggered terms for directors. I need to look into why that's not a hot topic.
In 1996, People magazine called her, "the nation's most obstreperous corporate gadfly," in 2002, Vanity Fair called her the most famous and least-loved shareholder activist in the country, and in 1993 Washingtonian magazine named her one of the 25 most annoying Washingtonians. But, let's be honest. That's saying something.
Brokamp: That is saying something. How do you choose?
Southwick: When Peter Carlson of the Post wrote a profile on her in 2003, she called him up and suggested the headline herself, which was, "I was gifted with both extraordinary beauty and extraordinary brains, and I've used them both to my utmost advantage." Even though she passed away this week, she already had her gravestone [although it was more like a monument] installed in 1981 in Rock Creek Park.
Brokamp: Wow! That is estate planning right there.
Southwick: It lists her resume, her many marriages and divorces [I think there were four], and the phrase, "Power is greater than love and I did not get where I am by standing in line nor being shy," which is very true. One of her ex-husbands is also buried there, but it only lists his accomplishment as being her ex-husband.
Nell Minow, who listeners of Motley Fool Money will recognize [she's also a big shareholder activist] was quoted in the 2002 Vanity Fair piece and sums it up nicely. She was quoted as saving, "The Evelyn Davises of the future are on the Yahoo message boards." Remember this is 2002. Minow says, "It used to be that you had to be financially independent and willing to be very controversial in order to confront corporate management. Now you can sit in your bedroom at your computer and be a shareholder activist. This is going to create a million new Evelyns."
So shareholder activism has become easier because of the internet, but let's be honest. I wouldn't even expect Bro to wear hot pants to a shareholder meeting...
Brokamp: Is that a challenge?
Southwick: ... whatever they are. And that, Bro, is what's up.
Brokamp: Right now Alison, as we speak, millions of Americans are planning their Thanksgiving meals trying to decide how much to buy of this, and how much to buy of that, and making sure that they have enough of the things that should make up the core of any traditional meal, but also a little bit of [what] should be added as a complement to make sure that everyone goes home happy, healthy, and satisfied.
Brokamp: You know, it's an awful lot like something else. Do you know what that else is?
Southwick: I do, because I forced you to do this topic this week!
Brokamp: You're right! It's portfolio allocation, of course. Here at Answers HQ, we often get lots of questions about portfolio allocation. If you listen to our Mailbag episodes, you know this is true. A lot of questions about how much I should have in stocks and bonds? How much in large caps or small caps? International vs. U.S.? Those types of questions.
We thought we'd take this pre-Thanksgiving episode and provide some broad asset allocation guidance by using a very strange, elongated, and barely believable analogy that is comparing asset allocation to setting the table at Thanksgiving.
Southwick: I don't think this is going to be that much of a stretch but, then again, I just have to sit back and listen.
Brokamp: We're going to use as the benchmark guidance for the overall asset allocation a report from Morningstar named their "2018 Target-Date [Fund] Landscape Report." They looked at all of the target-date funds out there and provided a general, average allocation.
For those who don't know, a target-date fund is a reasonably allocated fund based on when someone is going to retire. These days just about all major mutual fund companies offer them. We're going to use this as the foundation -- sort of like a wisdom of the crowd asset allocation -- and then I'll give a few thoughts of my own because, generally speaking, the average target-date fund is pretty conservative. Most people who are Motley Fool members or listeners tend to be a little bit more aggressive, so I'll have a few things to say about that.
And then for each major asset category, I'll add some nutritional facts, which is basically some historical return information. So pull up a chair, everyone, and prepare yourself for a feast of investing information. Are you ready?
Southwick: I'm so excited!
Rick Engdahl: [Sings] "At Alison's restaurant."
Southwick: Rick has been trying to get Alison's restaurant into the show for about as long as we've been on the show.
Brokamp: About three-and-a-half years.
Southwick: Are you really going to play this music?
Engdahl: I think I already have.
Brokamp: Let's start with the main course -- the star of every Thanksgiving feast -- the turkey. It's the mainstay of the meal and the biggest item on the table, partially because it's one of the largest birds in America. You may have heard that Ben Franklin thought that the turkey, and not the bald eagle, should be our national bird. It turns out that it's not necessarily true, but he did write in a letter that the eagle has a bad moral character and that the turkey, in comparison, is "a much more respectable bird."
Southwick: Is an eagle a scavenger?
Brokamp: Yes, that was part of his point. His wrote that, "The turkey is a much more respectable bird and, with all, a true original native of America. He is, besides a little vain and silly, a bird of courage and would not hesitate to attack a grenadier of the British guard who should presume to invade his farmyard with a red coat on." So think of that when you're having your turkey. You're eating the bird of courage, according to Ben Franklin.
So what's the turkey of your portfolio? Of course it's U.S. large-cap stocks, most commonly represented by the Dow or the S&P 500. These are the big-name, blue-chip, generally more established companies.
So let's look at some of the nutritional facts; that is, the historical returns. Since 1926, U.S. large-cap stocks have averaged 10.2% a year. The best year they were up 54% and the worst year down 43%. On average, U.S. large-cap stocks have earned money in three out of every four years.
According to the Morningstar report on target-dated funds, on average a fund has around 40% of its stock allocation [with] U.S. large caps. I'm just looking at the stock allocation there [not stocks and bonds]. [Of] just stocks they have [allocated] 40% to U.S. large caps. I think that's a fine, reasonable start, although in the model portfolios I've created for my Rule Your Retirement service, it's actually a little lower because I allocate more to mid and small caps which we'll get into later. But generally, that's a pretty good place to be with U.S. large caps.
If you're more aggressive you go smaller. If you are maybe closer to retirement or in retirement, those portfolios tend to have more large caps because historically large caps are less volatile. Also, they're more likely to be paying dividends.
It will be interesting to know, going forward, how much less volatile large caps will be compared to mid and small caps and even international because, when you look at the top 10 companies in the S&P 500, you're looking at Apple, Amazon, Facebook, Alphabet [formerly of Google]. It does seem to me that some of the bigger companies have become...
Southwick: Tech, tech, tech.
Brokamp: ... a lot more volatile. So we'll see going forward. Generally speaking, if you look at the other U.S. large caps [things like Johnson & Johnson, Procter & Gamble and all the banks], those do tend to be a little bit more stable.
Southwick: When you're talking about allocating large-cap stocks, then you are talking [agnostically] of what industry they're in.
Brokamp: Right, exactly. Now let's move on to the next item on our Thanksgiving investment menu -- potatoes! Likely of the mashed variety. What are the potatoes of your portfolio? I say U.S. small caps. And while the phrase small potatoes usually denotes something of little consequence, the historical returns of small-cap stocks are, well, spud-tacular.
Since 1926, U.S. small-cap stocks have returned 12.1% a year, so about 2% more a year than large caps. The best year was 143%. The worst year was down 58%. Now this Morningstar Target-Date Report didn't break out small caps, specifically. Instead they grouped small caps and mid caps together, what many people call SMID.
Brokamp: There you go! But by looking at the allocations of some of the biggest target-date funds, I could see that roughly speaking, for most of these funds, when you look at the SMID category a quarter of it is actually small. So, again, looking at the broad category of target-date funds and what some of the biggest firms think how you should invest, they have about 18-19% in SMIDs, which means about 5% in small caps and that's just 5% of your stock allocation.
I think that's way too small. Especially if you are a moderate to more-aggressive investor, it's perfectly fine to have at least 20% of your stock allocation in small caps and maybe as much as your large-cap allocation.
Now, when I talk potatoes in your portfolio, I'm talking about the standard white variety, but I know there are some people who like the sweet potatoes mush with the marshmallows on top for Thanksgiving.
Southwick: Not this girl, but all right. Let's talk about it!
Brokamp: When it comes to your portfolio, the sweet potato mush could be microcaps. Those are the smallest of the small. We're talking companies that are worth $250 million and maybe up to $500 million. When you look at the long span of history, they actually have performed the best of any asset class; like 14% a year.
The problem is they're crazily volatile and also because they're so small they can often be illiquid, which makes them difficult to buy. In fact, if you look at some of the microcap index funds [and there are only a few], they have trouble matching the index because it's difficult to buy and sell some of the stocks that are actually in the index. In my model portfolios in Rule Your Retirement, only those who are more than 10 years from retirement have an explicit allocation to microcaps. For those who are closer to retirement, I don't have that specific allocation because they're so volatile.
So you don't need them, just like you don't need the sweet potato whatever, or as some people call them, yams.
Southwick: I'm not going to miss them on my plate.
Brokamp: You're not going to miss the microcaps.
Southwick: So I've got turkey. I've got some white mashed potatoes. What's next?
Brokamp: I mentioned the mid caps and I'm going to give a specific allocation to mid caps and I'm going to say it's the stuffing.
Southwick: I do love stuffing!
Brokamp: Or the dressing depending on where you live. Generally speaking, to folks in the North it's stuffing and to folks in the South it's dressing. And I chose mid caps to be the stuffing because just as stuffing is something that people usually forget about during the non-holiday time of the year, people don't usually think of mid caps. It's like the ignored asset category, especially when you're looking at the size of companies.
Southwick: But stuffing's so good!
Brokamp: The stuffing is really good!
Southwick: It's so good!
Brokamp: So if you look at the long-term history [like since 1926], mid caps performed just about right in the middle between large and small. But there are long periods when mid caps outperformed both. For example, since 1993 mid caps have outperformed large caps and small caps, so it's not something to ignore in your portfolio. I think you could start again with what the target-date report has -- an allocation of about 15% of your stock allocation. I think you could easily bump that up to 20-25% as to how much you should own in mid caps.
So far we've covered a lot of bland-looking food. A lot of white. A lot of brown. If I add some color, I'm moving on to that jiggly staple of Thanksgiving tables -- cranberry sauce!
Southwick: Now are you of the family that needs to have that cranberry sauce come out of a can and keep those ridges evident or are you, no, it needs to actually look like cranberries? Or do you guys actually buy fresh cranberries?
Brokamp: It depends on whether I'm in charge of providing it for the meal. With our family, I'm usually in charge of bringing the drinks, which gives you an idea of how much faith my family has in my cooking. If I were in charge of the cranberries, they would come out of the can which, by the way, according to Smithsonian Magazine, is how something like 74% of people do it. Only 26% of people actually get the cranberries and make the sauce.
So, in our portfolio that we are setting before us, I'm putting cranberries as style investing. Up to now, we've been talking about investing according to size, but there are other factors, and one of them is style; basically growth vs. value. Every portfolio should have some growth and value just like every Thanksgiving table should have some cranberries.
But depending on how you want to lean [a little bit toward growth, a little toward value] is really up to you. The long-term returns on whether growth beats value or vice versa is somewhat inconclusive. Plenty of academic evidence shows that value outperforms, but there are many periods where growth outperforms for a long period, including our recent period. Over the last several years, growth has just significantly outperformed value.
I'm not going to go one way or the other. People like Jack Bogle say over the long term it doesn't matter, but you have a style just like you have a cranberry preference. Some people love tech stocks. [If you] love finding the new up-and-coming companies [in Motley Fool lingo like Rule Breakers], then you're going to be leaning toward growth. If you are more of a Warren Buffett-type investor, you like getting a good deal, or if you want your portfolio to have a better emphasis on things like dividends, you're probably going to lean more toward value. But in the end over the long term, it probably doesn't matter.
So far we have talked about mostly classic American foodstuffs. But if you look at your table, you might see a little bit of influence from other countries and at my family's table, the most prominent, especially for the vegetarians, is macaroni and cheese. It actually has a Greek origin, both the product as well as the name.
Southwick: What? Macaroni and cheese is Greek?
Brokamp: Well, the macaroni part.
Brokamp: The macaroni started with Greece, then moved to Italy. And then in the 1700s in England the term macaroni started being applied to people who were basically dandies. Like they tried to bring European influences to England. Overdress a little bit.
Engdahl: Maybe stick a feather in their hat.
Southwick: Yeah, they stick a feather...
Brokamp: I was just getting to that. So Yankee Doodle originally was written by a British surgeon making fun of Americans who put a feather in their cap and then thought that made them look more sophisticated. But then the Americans were like, "We love it!"
Southwick: We love pasta!
Brokamp: We love it! We're going to embrace it.
Southwick: Yeah, why not?
Brokamp: Now Yankee Doodle is the state song of Connecticut.
Southwick: Oh, really?
Brokamp: As for macaroni and cheese, that started in England and is now very popular in America. So, when it comes to your portfolio this, of course, is your international allocation.
Southwick: I was wondering how you were going to get there. Wow!
Brokamp: We don't have as good stats on international stocks, so for this I'm just going to go back to 1970. Since then international stocks have provided an average 8.9% a year. We mentioned a couple of episodes ago about how many people, like Jack Bogle of Vanguard, think international investing is not necessary. There's certainly no evidence that international stocks outperform U.S. stocks over the long term, plus many U.S. companies have plenty of business overseas, and I generally agree.
That said, I do have significant allocation in my own portfolio, as well as is in the Rule Your Retirement model portfolios. I should finish with the nutritional facts, here, and that's the average annual return of 8.9%. The best year was 70%.
So it's pretty good. Worst year a loss of 43%. What do these overall target-fund date allocations look at? What are those looking at in terms of international stocks? Basically around 28% for non-U.S. developed [so that's Canada, England, Western Europe generally speaking], and then 6-7% emerging markets. So in my little allocation, here, the macaroni and cheese is the developed and the emerging markets are the lentils on your table...
Southwick: Oh, man, I love lentils!
Brokamp: I know you love lentils!
Southwick: Like some curried lentils that your vegan sister-in-law brought. Is that what it is?
Brokamp: Right, something like that. So basically they are looking at allocating more than a third of your stock portfolio to international stocks. Most Americans are not there, and even I have in my allocations closer to like 30%.
The tricky thing about emerging markets is the data for emerging markets, depending on what you look at. There's some data sources that say they outperform all other types of stocks and other data that say they underperform all other types of stocks, partially because the data on some of these emerging markets is not so good and there's some debate on what makes an emerging market; for example, South Korea. Is that an emerging market or not?
Southwick: It feels pretty emerged.
Brokamp: But the thing is if you're going to go international, you're going to get more volatility in the U.S. stocks, and the more you tilt your portfolio toward emerging markets, it's going to get crazy. So keep that relatively small, especially if you're not a particularly risk-tolerant investor.
A few months ago I did a survey of investment return assumptions across many of the major firms. The vast majority expect emerging markets to outperform U.S. stocks over the next decade. There's going to be a lot of volatility along the way and, of course, who knows if that will actually happen in the end.
Southwick: So you have a valid reason for maybe not loading up on lentils and not offending...
Brokamp: I'm just staying you don't need lentils to have a perfectly fine Thanksgiving meal.
Engdahl: Just enough to be polite.
Brokamp: [Laughs] There you go! OK. So far we've talked about stocks. Well, what about bonds?
Southwick: What about bonds?
Brokamp: Welcome, ladies and gentlemen to the green bean casserole of your portfolio. Some people love them. Some might say they're even good for you. Others, however, can't stand them. I'm like that!
Southwick: I love green bean casserole! There's no way it's healthy!
Brokamp: Well, the bean part might be.
Southwick: Green beans are barely healthy for you and then you're like, "Cream of mushroom soup! Fried onions! Here's the veg!"
Brokamp: An onion's a vegetable, right? Just like a French fry. So that's bonds for you.
Southwick: That's OK if they don't give you a heart attack. Way to go.
Brokamp: Let's look at the historical returns. Since 1926, intermediate government bonds have returned 5.5% a year. Best year -- 29%! Who knew you could get 29% from bonds in a single year? Worst year was -5%, and there have only been a handful of years when bonds lost out, and obviously that's one of the big benefits.
The problem is bonds are particularly unattractive right now because we're in a rising interest rate environment. When rates go up bonds go down. In fact, this year they're actually down. It's never great. It's particularly bad this year because the S&P 500 is also down. And you buy bonds because you want something to be up in your portfolio when your stocks are down.
In fact, since 1926 there's only been two years when both bonds and stocks lost money. The last time was 1969, so we're actually in the middle of what could be a very unique year. Who knows? Maybe the stock market will recover before the end of the year. Bonds probably won't, because the market expects that the Fed will raise interest rates again at the December meeting. I think we've pretty much locked in the loss for bonds this year.
So, what else can you do if you want to have some money out of the stock market? Well, then we'd come to the rolls of your Thanksgiving meal and that is cash.
Southwick: Ah! Bread.
Brokamp: Bread! Your boring bread stuff, right? Everyone should have some, and you can go with the basic, boring rolls that you buy in bulk at the grocery store. That's like going to your local bank and opening up a regular, old savings account and you're not going to get very much. Or you can put in a little more effort. Make your homemade cornbread. Make your homemade whatever. Bacon-filled croissants or something like that. Basically if you put in a little more effort, you can actually earn more than 2% on cash these days, so I think it's worth doing that.
Looking at the historical returns, we're looking at T-bills, which are short-term Treasuries, and basically an equivalent of cash. Since 1926, T-bills have returned 3.4%. The best year was almost 15%. That was in 1981. The worst, of course, is zero, and that's the great thing about cash. It doesn't lose value.
The overall question, then, is how much should you have in cash and bonds? This really depends. When you look across all target-date funds, it surprisingly doesn't change based on the target retirement date. The allocations for these various types of stocks are pretty much the same whether they expect you're going to retire in five years or 50 years. Obviously, that's different when it comes to how much you're going to have in bonds and cash, because the closer you are to your retirement, you should be playing it safer.
But these funds play it pretty darn safe. For example, for a 2010 fund [so basically anyone who's already retired], overall they recommend that you have 62% of your portfolio in cash and bonds. That's playing it pretty safe. And then it goes down as you get further out. So a 2025 fund has about 40% in cash and bonds, 2040 only 17%, and 2050 only 11.2% in cash and bonds.
For me, the Rule Your Retirement model says you should have 40% out of the stock market if you're retired, 25% out if you're within a decade of retirement, and if you're more than a decade from retirement, 5% is fine. And these days I think that, especially for money you need in the next five years that you want to keep perfectly safe, cash is the way to go, because the bond market is just going to continue to struggle over the next year or two.
Over the long term, if you're just looking for some overall diversification to your portfolio, a diversified low-cost bond fund is perfectly fine. Rates going up is actually good for future returns for bonds over the long term. It just hurts in the short term. At some point bonds will return to their historical average of beating cash by 2%, but that's not going to happen for another couple of years. So for money you need to keep absolutely safe, stick to the rolls. Stick to the cash.
Brokamp: And so that's it. Now there are, obviously, things I left out. There's the dessert. There's the gravy. The thing I thought could be part of that are what we would call portfolio alternatives. It could be commodities. Could be real estate. It could even be things like private equity and hedge funds. These things are not necessary. If you do everything that I've talked about, you are more than 90% of the way there.
Southwick: You're fed. You're really well fed.
Brokamp: That said, I totally acknowledge that you cannot have a Thanksgiving meal without dessert, so that's why I'm not going to try to stretch this analogy out even further by comparing them, but just saying that there are legitimate reasons to have things, particularly, I think, the alternative assets like commodities and real estate investment trusts [otherwise known as REITs]. [These can have] a dedicated allocation in your portfolio -- maybe 5-10% at the most in some cases -- but generally speaking it's not necessary.
Engdahl: I think dessert is more like lottery tickets, isn't it? That doesn't sound like dessert, what you just said.
Brokamp: I'm trying to think what the investment equivalent is -- something that you know you're going to like. I mean, who doesn't like dessert? There are some people who don't but for me [and especially people like my kids], they're just like, "OK, I have to eat this stuff that my parents put on the plate so I can eventually get to the dessert." I don't know what the investment equivalent of that is.
Southwick: Maybe the investment equivalent is don't forget to keep some money on the side and do fun things for yourself.
Brokamp: That's good!
Engdahl: Amazon gift cards!
Brokamp: There you go! That's a good one!
Southwick: And when you're done eating and investing, don't forget to have fun.
Brokamp: That's it. That's the main stuff.
Southwick: See, that wasn't such a tortured metaphor! That was great! You did a great job!
Brokamp: Thank you! Thank you very much!
Southwick: Can you just do a really quick recap? So, turkey?
Brokamp: Turkey, U.S. large caps. Again, an overall survey of mutual fund managers who do target retirement funds think it should be 40% of the stock allocation. I think that's fine, especially if you're more conservative. I'd bring it down so that I could contribute more to small caps [the potatoes]. I think at least 20% [the SMIDs].
Then the midcap, which is the stuffing or dressing. Another 20-25%. Then you get into the macaroni and cheese of your portfolio. That's the international stocks. Your macaroni and cheese was the developed country like 20%. The lentils -- the emerging markets -- maybe 5-10%. Then we get to the exciting green bean casserole of...
Brokamp: Bonds. And then the rolls were the cash. And for that it's just, generally speaking, as baseline if you're retired. That's 40% in the casserole and rolls.
Southwick: Bonds and cash -- OK. We're going to get an email from someone who's like, "I went and I bought a whole pallet of rolls at Costco. I don't know if this investment's going to pay off, but I did it. I've got five years' worth of rolls in my basement."
Brokamp: Yes, within 10 years of retirement that's 25% out of the stock market. More than a decade, as little as 5% out of the stock market. And I'll just add the classic thing we say probably every other episode. Any money you definitely need in the next three to five years should be out of the stock market and these days, given what's happening to bonds, it's probably better to just keep them in cash.
Southwick: And there you have it! What a delicious, nutritious Thanksgiving meal!
Brokamp: Thank you!
Southwick: I'm thankful for you!
Brokamp: Oh, well, I'm thankful for you!
Southwick: I'm thankful for you too, Rick!
Brokamp: The guy behind the glass.
Southwick: That's the show! It's edited thankfully by Rick Engdahl. Really, you guys do not know what ends up on the cutting room floor. Our email is Answers@Fool.com. You can join our Facebook group. It's called Motley Fool Podcasts, but you have to be invited in, so just knock and you'll be let in. Also follow us on Twitter -- or don't. We're not really super active there at the moment, but we'll get better. So, for Robert Brokamp, I'm Alison Southwick.
Brokamp: Happy Thanksgiving, everybody!
Southwick: And stay Foolish!