Participants Need Reminder to Keep Portfolios Balanced

November 21, 2012 ( – Investment portfolios should maintain a balanced approach by not relying too heavily on fixed income.  

Fixed income has a place in portfolios, but investors need equities as well, Eric Stevenson, senior vice president and chief sales officer for Nationwide Financial’s public-sector retirement plans subsidiary, told PLANSPONSOR. When the markets tanked, many investors ran to fixed products and missed an opportunity with equities when they took off during the recovery. If the market has already tanked, it’s the wrong time to get out of equity and move to fixed income, Stevenson said.  

Equities are necessary in a portfolio in order to keep pace with inflation, he added.

When it comes to fixed-income products in the public sector, Nationwide’s data revealed that of the more than 300,000 participants in its city plans, roughly one-third of those—about 3,600 plans—are invested only in fixed income. Fire and police workers have a more balanced approach to their portfolios than other public-sector employees, investing more heavily in equities and lighter in fixed income, he said.

Plan sponsors must educate participants about the importance of a balanced portfolio. “It’s not just about the cost,” Stevenson said. “It’s about the net return.” He emphasized that overall, participants are not making bad investment decisions, but education will help them.

Nationwide is a proponent of face-to-face education and helpful websites. In-person meetings offer a chance for interactive discussions and make it easier to answer questions, Stevenson said.