Credit: 
(New York)
"105 minus your age" has long been the golden standard, or back of the envelope standard, for allocation. While the rule has some merit, it has some big flaws too, as the WSJ has pointed out today. One big issue with it is that it does not all take into account an investor's risk appetite. Risk itself has two facets-an investor's willingness to take risk, and their realistic ability to do so. It is on the former point where the rule is so poor, because it could force a more risk averse investor into huge losses if they sell at the bottom of a downturn.
FINSUM : The bottom line here, as any financial advisor knows, is that each individual's circumstances should have a major effect on their allocation strategy.
- stocks
- bonds
- allocation
- golden rule
- risk
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
