Keep 80% of your money in stocks: Asset allocator

Stocks have had a historically rough start to the year, with the S&P 500 falling 6 percent for its worst week of losses since 2011. But despite the rocky road, one director of asset allocation says stocks should still play a large role in an investor's portfolio.

"For a 40-year-old investor right now, he or she should have at least a minimum of 80 percent in equities right now," said Albert Brenner of People's United Bank Wealth Management on Friday's "Power Lunch."

"I know that seems crazy after the four days we've had at the start of this year, but that's what the minimum would be."

The S&P 500 has lost nearly $1.1 trillion in market cap in the first week of January. For investors looking to protect their investments, Stacey Gilbert, head of derivatives strategy at Susquehanna, recommends buying put options on the S&P 500 ETF, SPY. Put options are a contract to sell a specific security at a set price and a set date.

However, Gilbert warned that the prices on protective options have risen amid the week's stock sell-off.

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"On a relative basis just given the recent volatility in the marketplace, those puts are trading more expensively than they have been," Gilbert said Friday, also on "Power Lunch." To account for the higher prices on options, Gilbert recommends using another options strategy called a risk reversal, in which one buys a put option and sells a call option, which limits profits but reduces the cost of buying.

"We have seen investors buy puts for protection, a very common strategy, and they sell some of the upside calls against it to help finance those downside puts that they're buying," she said.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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