One portfolio for life? |
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Bottom of Form Written by Paul Merriman and Richard Buck | September 23, 2005 | Many do-it-yourself investors want solutions they can implement once, then leave alone. Can individual investors adopt a strategy that's so good it will meet their needs from age 21 to 91? In this article, FundAdvice.com Publisher Paul Merriman and Managing Editor Richard Buck tell why they think the answer is yes.
Much of the work we do is focused on helping individual investors find just the right combinations of assets and forms of investment ownership (IRAs, taxable accounts and the like) to meet their individual needs. Since everybody’s financial situation is unique and usually evolving, we are not big fans of one-size-fits-all solutions.
We spend lots of time helping each person determine his or her risk tolerance. This is one of the most valuable things professional advisors do for their clients.
But we know that in real life many investors do not have professional help. Realistically, many do-it-yourself investors simply don’t take the time to adjust their investments to their changing needs and tolerance for risk. We know that many people want solutions they can set up once and then forget about.
We can't ever know in advance what the very best strategy will be. But here's an interesting question: Is there a single portfolio that will do a good job of meeting the needs of investors for 70 years, from age 21 to 91? We think the answer is yes.
The conventional wisdom holds that young people in their 20s and 30s should take bigger risks, typically investing exclusively in equities so they can maximize their opportunities for growth. That same wisdom dictates that older folks, especially those who are retired, should be much more cautious, having most of their money in cash,