Shifting Assets

QIs it good to move money into bonds when stocks fall, and vice versa? — L.T., Warsaw, Indiana

ANot necessarily. Instead, you might just figure out what portion of your assets you want to invest in bonds and stick with that until you have a reason to change your asset allocation, such as if five or more years have passed since you set it up, and you’re older now.

Younger folks might keep all or most of their assets in stocks if they have several decades of investing ahead of them. Those in or nearing retirement might move a larger portion of assets into bonds.

One rule of thumb suggests subtracting your age from the number 110 to arrive at a good allocation for stocks. So if you’re 40, you’d park 70% of your assets in stocks. If you can tolerate more risk, it’s fair to subtract from 120, instead, for a higher stock allocation. Remember that over long periods, stocks have generally outperformed bonds.

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QWhat does the insurance term “float” refer to?

— S.N., Bellevue, Washington

AWarren Buffett, CEO of the insurance giant Berkshire Hathaway, has referred to float as “other people’s money” — “money we hold but don’t own.”

When you — and other buyers of insurance — pay your insurance company your premiums every year, the insurer collects the money, which will help cover claims from customers. The money is collected up front, but claims are paid out throughout the year. Until that money is needed, the insurance company gets to invest it in stocks, bonds and the like — and gets to keep

any profits from such investments.

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