It’s not too late to de-risk your portfolio if you’re retired, or about to be

There are benefits to de-risking. Here’s how to do it.

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For investors hurtling toward retirement, sitting tight with stocks has been the path of least resistance in recent years. Stocks, especially U.S. names, have soundly outperformed bonds.However, recent events should serve as a wake-up call to take some risk off the table and give bonds a closer look. Stocks have recently encountered some volatility but they’re still near all-time highs. That provides pre-retirees and retirees with an opportune time to scale back equity exposure and plow the proceeds into safer assets like cash and high-quality bonds.

The benefits of de-risking

The key benefit that bonds confer to a retirement-decumulation portfolio is their lower volatility. Even though bond returns are apt to be lower than stocks’, bond returns are much more reliable.In retirement portfolios, holding a component of lower-risk assets mitigates “sequence risk ” — the prospect of encountering big portfolio losses early in retirement. Because equity-heavy portfolios have the potential for bigger losses than balanced or more bond-heavy ones, that leaves them more vulnerable to sequence risk.In addition to bonds’ lower volatility, today’s higher yields point to better return prospects from bonds over the next........

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