The older you get, the more stable your investments should become. But that doesn't mean you have to cripple your returns. A smart asset-allocation game plan can help you preserve capital and beat the market.
Diversify your asset class
A conservative investing strategy doesn't necessarily have to limit the assets you invest in. One way to keep a conservative portfolio and maintain exposure to a broad range of bonds and equities is to invest in mutual funds with a longstanding manager, good performance, low turnover, and even lower fees.
The Vanguard Balanced Index (VBINX) fund, for example, provides a mix of asset classes, with 60.6% in stocks and 39.4% in bonds. This fund has its top holdings in large companies with long and (comparatively) stable histories such as General Electric
But you can do better by building with your own conservative asset-allocation game plan.
Play the field
Add some spice, for example, with real estate. Real estate investment trusts (REITs) are a good way to gain exposure to both commercial and residential real estate trends. The Vanguard REIT Index Vipers
You could also, however, make your portfolio a little more conservative and ratchet up your bond exposure with Vanguard Inflation-Protected Securities (VIPSX), a fund that holds bonds of varying maturities and durations to limit volatility and outpace the rate of inflation. It has generated solid 6.9% five-year annualized returns.
Face your fear
The biggest downfall to investing is the potential loss of losing your savings. That's a very real risk, and while you don't run the risk of losing your capital stashing it in a mattress, you will lose spending power due to inflation. But by developing a smart asset-allocation game plan and investing in funds with good managers and low expense ratios, you can minimize risk and meet your investment goals.
If you're a conservative investor who's looking to preserve your savings and earn better returns, have no fear. Our resident fund specialist Shannon Zimmerman is here to help. In his Champion Funds newsletter, he outlines a model portfolio tailor-made specifically to the conservative investor, which, in addition to bond funds, includes stock funds such as Dodge & Cox International Stock
Shannon updates his portfolio monthly for Champion Funds members and goes through the rebalancing process annually. And to date, the conservative portfolio is besting its benchmark by more than two percentage points.
If you'd like to learn more about Shannon's model portfolios -- they come in aggressive and moderate flavors as well, both of which are trouncing their benchmark counterparts -- or some of the best low-cost mutual funds on the market, click here to join the Champion Funds community free for 30 days. There's no obligation to subscribe.
Fool research analyst Shruti Basavaraj allocates a percentage of her earnings to flashy Hawaiian shirts. She owns no shares of any companies mentioned above. The Fool's disclosure policy dictated but did not write this message.