No one likes growing older. Some may dress younger while other might lie about their age—we’ll do almost anything to keep that youthful spirit alive. But there are times when it’s important to act your age and that’s particularly true when it comes to managing your portfolio.
The reason is simple: when we’re young we can afford to take more risks. Mistakes are less costly and we have more time to recover. But we loose this freedom when we get older.
In terms of your portfolio it means that when you’re young you can afford to invest heavily in high-risk, high reward things like equities, because you have more time until you need your money. But later in life you’ll want to invest more of your portfolio in more stable assets like fixed income.
How do you know how much of your portfolio should be in equities and fixed income? In this video Bruce Sellery outlines a simple rule of thumb that will help ensure your portfolio is balanced for your age, even if you’re not ready to act it.