How old are you, and how much stock do you have in your investment portfolio?
Conventional wisdom has it that investors should reduce their equity holdings as they get near and into retirement and shift toward safer, fixed-income investments. That strategy is the basis for target-date funds, which follow a "glide path" of decreasing allocations to stocks and increasing allocations to bonds as a target retirement date approaches.
The idea is that younger investors with longer earning and investing horizons can take on more risk than older investors — particularly retirees — who may be depending on their investment portfolio for income and can't recover from large losses.
"The allocation to risky assets starts to decrease at age 40 — about the time when human capital begins to diminish," said Matt Brancato, head of defined contribution advisory services at Vanguard Group, the largest provider of target-date funds.