Inflation is a killer. The value of your portfolio contracts in terms of buying power by the net effect of inflation compounding. If the core rate of inflation is 4%, you need to add 4% each year to your capital to maintain purchasing power. My plan is as follows: Set your portfolio 50% intermediate fixed-income (ideally 5-year duration); 45% dividend-paying, balance-sheet-strong, blue-chip common stocks and 5% gold.

The current yield from income and dividends will give you spending money for day-to-day expenses. Gold performs well during periods of geopolitical upheaval, inflation and U.S. dollar depreciation—when equity markets recently took a turn for the worse, gold surged. And as a blue-chip company's dividend increases through the years, purchasing power is maintained. Furthermore, I assure you that a company that increases its dividend year after year will witness an increase in share price. As such, you get: a current cash payout, a pay raise as your company's dividend increases and price appreciation over the long haul.

NEXT: Don't spend your way to the poorhouse