Find income without bonds. Preferred stocks and selected real estate investment trusts (REITs) can be a relatively safe way to get income that is not too dependent on the election. Germain likes REITs that are made up of government-backed mortgages. The Fed is buying up mortgage securities at a rate of $40 billion a month, lending support to that sector. Germain's favorites are iShares Mortgage Plus Capped Index Fund (symbol: REM) and Market Vectors REIT Mortgage Income ETF (MORT), as well as PIMCO Real Estate Real Return Fund (PETAX). But be careful with other REITs that derive income from rental properties. Their yields could be less attractive as home buying improves.
In the "other income" category, Koesterich favors preferred stocks. Some ETFs made up of preferred stocks yield as much 6 percent. Large-cap companies' dividends are another income source, and unlike standard government bonds, the payout can rise in a stronger economy with more inflation.
The bottom line on portfolio allocation. There is no one solution when it comes to allocation. It depends on your goals for retirement, your age, and other factors. "It really depends how aggressive you want to be with your investments," says Koesterich.
Still, the U.S. presidential election is a good time to check your allocations because it tends to mark the start of a new investing cycle. The pattern has been for markets to perform better in the second half of four-year terms. For some undecided investors, locking things down now will give them time to consider the long term and eventually put more money to work.
"It's reasonable to want to raise some cash with all of the uncertainty. But people now already have a lot more cash sitting in accounts than they should," says Koesterich. "When I talk to our advisers, they say most people have huge cash piles."