What the experts say

The 60/40 portfolio is overrated

“What if everything your investment adviser is telling you is wrong?” asked Brett Arends in SmartMoney.com. For decades, investors have been assured that a “balanced portfolio” of 60 percent stocks and 40 percent bonds, rebalanced annually, will make about 8 percent a year. Unfortunately, this advice is based “on a dubious reading of history, a misrepresentation of the facts, and a fair amount of sleight of hand.” The “ugly truth” is that, over the past 85 years, the 60/40 portfolio has gone through long periods when it did very badly for investors. Most of the gains came in the 1950s and over the past 30 years. But for other long stretches, “the returns were meager, or nonexistent,” especially after factoring for inflation. Money manager Charles de Vaulx says that’s why investors have to look beyond traditional stocks and bonds to investments like inflation-protected securities, gold, and commodities. In the end, the fund industry’s “simplistic solutions” come with no guarantees.

Insurance you can do without

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Americans spend more than $1.1 trillion on insurance premiums each year, said Jeanette Pavini in MarketWatch.com, but plenty of policies simply aren’t worth the cash. Pet insurance, for instance, often has so many restrictions that owners are probably “better off setting aside money every year” for a pet’s care. Mobile phone insurance will almost certainly involve a “hefty deductible” if you have to replace an expensive smartphone, so a wiser strategy is to save older phones you can reactivate in case of damage or theft. ID theft insurance is unnecessary, since federal consumer-protection laws shield you from the costliest consequences. And take a pass on flight insurance. Distinct from travel insurance, “it only pays out if your flight crashes.”

Credit scores on the rise

There’s a glimmer of “light at the end of the credit crisis tunnel,” said Martha C. White in Time.com. Last year 18.3 percent of Americans had top-notch FICO scores, between 800 and 850—the highest percentage since 2008. The number of people at the bottom of the credit tier is also down to pre-recession levels. It’s undoubtedly “good news” that people are improving their scores by paying bills on time and keeping credit card balances low. But as lenders increasingly tighten credit standards, “what used to be a great credit score is now just barely decent.”