Quote:
Originally Posted by jimhurtt@twc.com
Becca: in my opinion that is an excellent allocation of your allocation. Rule of thumb is your age should determine percentage. For example if you are 65 years old then 65% of your holdings should be in what would be considered safe investments, i.e. bonds, money market, etc.. The other 35% could be placed in stocks so you could some short term growth potential.
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Age is really a bad way to set your allocation. I realize this prior "method" was simply a surrogate for Health and risk tolerance but it is a poor investment strategy. There are sickly 50 year olds and healthy 80 year olds. There are rich 50 year olds and poor 80 year olds and the opposite.
If you can weather a market correction and you can live without your retirement funds age adjusting your asset into bonds, which have not performed much at all in recent years, means you're just leaving money on the table and probably actually losing money due to inflation.
The same goes for money market/cash. If you need the liquid assets, fair enough, keep in there what you need but if you don't, put it somewhere it's going to earn. There are fairly conservative mutual funds that consistently return 4-6% even in flat and bear markets.
It's a risk/reward calculation and basing it on age without factoring in a lot of other details of your life and needs doesn't do anyone any good.
There is no question you should go more conservative with age, this issue is how much and 35% in growth for a healthy 65YO is bad, as is 50% in stocks for a sickly 50YO.