Not all Baby Boomers are bailing out of stocks, financial planners and retired Boomers say.

Responding to yesterday's column outlining James Cramer's controversial "Boomers are bailing" thesis, Vancouver-based advisor Adrian Mastracci said, "Thankfully, my calls from Boomers are completely different."

Mastracci says clients are not bailing out of equities and swimming to the lifeboats. "They all have part of their portfolio allocated to fixed-income securities. This makes a substantial difference."

Where Cramer is closer to target is a particular type of investor who overdosed at the top of the bubble on fashionable tech stocks, who are now looking for advisors to straighten out what's left of their battered portfolios.

He's hearing from potential clients who had "virtually everything in stocks. The past five new clients had 85%, 90%, 95%, 95% and 100% in equities," Mastracci says, "Obviously, they had not heard of asset allocation and investor profiles until I pointed it out."

It's hard to believe that in this age of 24/7 media and Internet coverage of investing that 50-year old investors haven't absorbed the lesson of asset allocation.

But I'm not that surprised. The past year I've heard from many retirees whose advisors -- whether out of ignorance or malice -- had elderly clients still 100% in equities.

High equity content is "probably the biggest difficulty with Boomer portfolios," Mastracci says, "often coupled with an investor profile that has no resemblance to the actual allocations."

Asset allocation is not the same thing as diversification. A portfolio of a dozen equity mutual funds representing stocks from around the world, in all the economic sectors and representing companies of all sizes, is still not diversified enough -- because it's not asset allocation.

Such portfolios consist of only one asset class: stocks, also known as equities. There are at least two other core asset classes: bonds and cash, plus several optional asset classes: precious metals/gold, commodities//managed futures, real estate and short-selling hedge funds, to name a few .

Since Baby Boomers are roughly half a century old, their core asset allocation should be almost evenly divided between stocks and cash/bonds. Every case is different and professional advisors can suggest the exact appropriate mix.

Despite three years of sagging stock markets, diversified low-cost portfolios have held up amazingly well, says the Web site www.bylo.org. Using this newspaper's FPX indexes as a benchmark, from inception in April, 1996, the Balanced (50%/50%) portfolio returned 7.2%, Income (70%/30%) portfolio 7.7% and Growth (30%/70%) portfolio 6.6%. Any of these returns are a far cry from the devastating losses some investors have suffered.

Asset allocation was the key to the Rip Van Winkle portfolio I've described in columns aimed at younger investors with modest RRSPs.

A simple balanced fund -- preferably a low-cost one like Trimark Income Growth -- provides instant asset allocation.

As portfolios grow, tax considerations bring complications. But after a decade at this job, I've come to the following simple approach which may help free you from worrying about markets every day.

If you're in the 50-50 camp (near age 50, with a risk profile of 50% stocks and 50% bonds), forget about stocks and pack your RRSP entirely in a ladder of strip bonds and real-return bonds, or a high-income bond fund. Such investments are too highly taxed outside RRSPs.

By now, Canadian Boomers should also have started to build a non-registered or "taxable" investment portfolio. If this is roughly the size of your RRSP, it can be packed with quality dividend-paying stocks and equity funds.

Again, taxes are a major consideration: Canadian dividends receive favourable tax treatment, and capital gains and losses are better handled in non-registered vehicles.

I'd go so far as to suggest this: the core of a non-registered portfolio need be no more complicated than being half the Barclays i60 exchange-traded fund (passively managed Canadian stocks, MER 0.17%), and half a reasonable priced active global equity fund like Trimark Fund (MER 1.62%).

If Boomers are bailing, it's because they now realize their registered plans are too heavy in stocks.

For many, their non-registered portfolios are smaller than their RRSPs, which means the bear market is an opportunity to gradually build up a quality non-registered portfolio.

I also heard from Boomers who still believe in stocks. Norm Rothery, publisher of Toronto-based The Rothery Report quips that he hopes Boomers will flee the markets more quickly. "I hope to spend another 50 years or so on this rock and I'd like to see low low prices."

Keith Betty of Lethbridge retired in 1998 at the age of 50 and continues to advocate a mix of bonds, quality dividend-paying stocks and REITs (real estate investment trusts.) His portfolio is up 30% since retiring.

Since world markets tend to move down in tandem, investors must include non-equity assets in their portfolio, he says. However, "this isn't the time to exit equities altogether. Buy well-managed companies, with real earnings and real dividends, that have been beaten up."

Selling all your equities now would be "utterly wrong," Betty says, "Just the opposite: I have sold bonds in the last few weeks to increase my equity holdings."

Betty cleaves to the 3Ds of discipline, diversification and dividends. His ideas can be found on the Web at Shakespeare's investment primer.