I recently received free advice from Financial Engines that implied strongly I should re-balance my portfolio to decrease my weighting of equities and increase my weighting of bonds. Considering coming inflationary pressures from a U.S. expansion and continuing high oil prices, the need to raise U.S. interest rates, and the incentive for the Federal Reserve to inflate domestic real estate prices, we think that Financial Engines' advice is dead wrong.
We suggest taking a contrary position and decreasing holdings of safe debt securities and increasing your weighting of small- and mid-cap stocks. This is not a short-term suggestion. Gains will occur over the next 24 to 36 months.
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