Older investors take a pass on bonds

Here are three of the week’s top pieces of financial insight, gathered from around the web:

Older investors take a pass on bonds

More older Americans are investing “like 30-year-olds,” said Anne Tergesen in The Wall Street Journal. According to Vanguard, “nearly half of 401(k) investors” who are over the age of 55 and are actively managing their money “held more than 70% of their portfolios in stocks,” an increase from 38% in 2011. Some 20% of even the oldest investors, past age 85, “have nearly all their money in stocks.” Financial advisers say older investors are taking a risk because they may be forced to sell in a downturn. But even after the bad years like 2022, many dismiss bonds as “stodgy and conservative,” because the stocks have provided substantially better returns for four decades, with the S&P 500 index gaining an average of 10.1% a year.

The Queen of Soul’s will

A thorny legal dispute involving Aretha Franklin’s estate illustrates the importance of having a proper, formal will, said Greg Iacurci at CNBC. The Queen of Soul “jotted down her wishes on two handwritten wills — one dated in 2010 and the other in 2014” that were discovered in Franklin’s home after her passing in 2018. Her sons “disagreed over which handwritten will should govern their mother’s estate,” because of differences in the division of property, including Franklin’s $1.1 million home. “Certain states, such as Michigan, recognize handwritten wills,” and a Michigan jury last week decided that the 2014 version — which was “found in a notebook under a couch cushion” — should be deemed valid. But this decision “will be talked about in law schools in every state in the country,” said one financial planner.

Nasdaq index to cut weight of Big Tech

The Nasdaq-100 will execute a very rare “special rebalance” to redistribute the weight of its members, said Lu Wang in Bloomberg. Just six companies — Microsoft, Apple, Alphabet, Nvidia, Amazon, and Tesla — now make up 50.9% of the total market capitalization of the index. That could put some big funds that track the Nasdaq-100 in trouble with the SEC, which has a “diversification rule that limits the aggregate weight of large stock holdings to 50 percent.” The Nasdaq rebalancing is expected to cut the group’s weight to 40 percent. “Companies set to benefit from the rebalance include Starbucks, Mondelez, and Booking Holdings,” according to an analysis from Wells Fargo, which notes that the event doesn’t “pose a lasting threat” to tech megacaps. 

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