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Charles Schwab Cautious of ‘This’ Widely Held Investment

Monday, 15 Oct 2012 | 7:59 PM ET
Charles Schwab Corp. founder and chairman Chuck Schwab
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Charles Schwab Corp. founder and chairman Chuck Schwab

Larry Kudlow couldn't talk with Charles Schwab without asking him for a little free advice.

If you're an individual investor, listen up. First and foremost, "I always believe in a diversified portfolio, " said Schwab during a live interview on The Kudlow Report .

And as part of a diversified portfolio, Schwab believes investors should have fixed income investments. However, he added a very serious note of caution.

"I think we're at the low end of a cycle – and when interest rates start going up – fixed income investments will go down, " Schwab said.

That's something Schwab says every investors must keep an eye on closely – especially older Americans who tend to hold a larger percentage of their portfolio in bonds.

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In fact, Schwab sees older Americans in a bit of a financial pickle, not only because of the issue mentioned above but because Fed policies have driven interest rates so low.

"Savings accounts, CD's, they generate next to nothing, " he said. "You can't even keep up with inflation."

Therefore, even at age 75, Charles Schwab think that stocks – presumably dividend paying blue chips – belong in every portfolio as an important component of a balanced approach to investing.

"Personally, I'd be 80% in stocks, " he said, "That's right, a young guy like me!"

Tune in:

"The Kudlow Report " airs weeknights at 7 p.m. ET.

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"