You may have heard simple rules like subtracting your age from 100 to determine how much to invest in stocks. While these adages offer a starting point, a truly effective strategy is far more personal. It considers not just your birth year, but your specific financial goals, your comfort with market swings, and your income needs. Building a portfolio that truly fits you requires a more nuanced approach. Understanding the principles of asset allocation by age allows you to move beyond generic advice and create a tailored plan that aligns with your unique journey, giving you a solid framework for making smart decisions through every market cycle.
Key Takeaways
- Define Your Asset Mix First: Before picking individual investments, decide on your strategic split between stocks, bonds, and cash. This core decision is the most important factor in managing risk and shaping your portfolio’s long-term performance.
- Tailor Your Strategy to Your Life, Not Just Your Age: While age-based guidelines are a helpful starting point, your personal situation is what truly matters. Your unique risk tolerance, financial goals, and time horizon should be the primary drivers of your asset allocation.
- Treat Your Portfolio as a Living Plan: Your asset allocation isn’t a one-time decision. Periodically rebalance your holdings back to their original targets and revisit your strategy after major life events to ensure it continues to serve your evolving financial goals.
What Is Asset Allocation?
Think of asset allocation as the game plan for your money. It’s the process of deciding how to split your investments across different categories, like stocks, bonds, and cash, to align with your financial goals and comfort with risk. This isn’t about trying to pick the next hot stock. Instead, it’s a strategic approach to building a portfolio designed to weather different market conditions over the long term.
Getting your asset allocation right is one of the most important steps you can take as an investor. It sets the foundation for how your portfolio will behave, influencing both its potential for growth and its stability during market swings. By creating a thoughtful blueprint from the start, you can stay focused on your goals and make disciplined decisions, rather than reacting to short-term market noise. This strategy is the bedrock of a sound investment plan, guiding how you build and manage your wealth through every stage of life.
Defining Asset Classes
At its core, asset allocation is about dividing your portfolio among different categories, known as asset classes. The three main building blocks are stocks, bonds, and cash. Stocks give you a share of ownership in a company and historically offer the highest potential for long-term growth. Bonds are essentially loans you make to a corporation or government in exchange for regular interest payments, making them a more stable part of a portfolio.
Cash and cash equivalents, like money market funds, are highly stable and easy to access, serving as a safe haven for your money. Spreading your investments across these different types of assets is the fundamental principle of building a diversified portfolio that can stand the test of time.
Balancing Risk and Return
The way you mix these asset classes directly impacts your portfolio’s balance between risk and potential return. There’s a natural trade-off: assets with higher growth potential, like stocks, tend to come with more volatility. In contrast, lower-risk assets like bonds usually offer more modest, predictable returns. Your ideal mix isn’t one-size-fits-all; it depends entirely on your personal situation.
Key factors include your financial goals, your time horizon, and your personal comfort with market ups and downs. For example, an investor in their 20s has decades to recover from market dips and might choose a portfolio heavy on stocks. Someone nearing retirement may prioritize preserving their capital with a larger allocation to bonds. Finding the right balance is the first step in creating a tailored investment solution that works for you.
Why It’s Your Portfolio’s Foundation
Asset allocation is the structural support for your entire investment strategy. Its primary benefit is diversification. By holding a mix of assets that behave differently in various economic climates, you can help protect your portfolio from the full impact of a downturn in any single area. When stocks are down, bonds might be stable or even up, helping to smooth out your overall returns.
This strategy is about managing risk, not avoiding it completely. A well-planned allocation helps you stay the course and avoid making emotional decisions when the market gets choppy. It provides a clear, logical framework that guides your investment choices, making it one of the most critical factors in reaching your long-term financial goals. You can explore more strategic insights to help shape your approach.
How Your Age Shapes Your Investment Strategy
Your investment strategy isn’t a “set it and forget it” plan. As you move through life, your financial goals, income, and tolerance for risk will naturally change. The most effective portfolios evolve with you, gradually shifting from an aggressive growth focus in your early years to a more conservative, income-generating approach as you near and enter retirement. This strategic shift is often called a “glide path,” where your asset allocation becomes progressively more conservative over time. Think of it this way: when you’re young, your portfolio can handle more turbulence because it has decades to recover and grow. As you get older, the priority shifts to protecting what you’ve built and ensuring it can provide for you. This doesn’t mean your strategy is dictated by your age alone—your personal circumstances are always the most important factor. However, your age serves as a powerful framework for structuring your portfolio. It helps you determine the right balance between seeking growth and managing risk at different points in your financial life. Understanding how to adjust your asset allocation at each stage is key to building a resilient portfolio that serves your needs today and for decades to come.
Investing in Your 20s and 30s
When you’re starting your career, your greatest financial asset is time. With decades until retirement, you have a long runway to let your investments grow and recover from any market downturns. This is the time to focus on growth. For most young investors, this means a portfolio heavily weighted in stocks. You can afford to take on more risk for the potential of higher returns because you have plenty of time to bounce back from volatility. A common approach is to allocate a large portion of your portfolio to a mix of U.S. and international stocks. The power of compounding is on your side, so the most important step is to start saving and investing consistently.
Investing in Your 40s and 50s
These decades are often your peak earning years. While your income may be higher, you might also be juggling more financial responsibilities, like a mortgage, saving for your children’s education, and planning for retirement. Your investment strategy should reflect this balance. You still need your portfolio to grow, so stocks will likely remain a significant part of your holdings. However, as retirement gets closer, you’ll want to start gradually shifting toward a more conservative stance. This is a good time to begin adding more bonds to your portfolio to reduce overall volatility and start preserving the wealth you’ve built. This approach helps you continue to build your nest egg while introducing a layer of stability.
Investing in Your 60s
As you approach and enter retirement, your financial priorities shift from accumulating wealth to preserving it and generating income. Your portfolio should reflect this change. While you’ll want to reduce risk, retirement can easily last 30 years or more, so your money still needs to grow to outpace inflation. Completely moving out of stocks is rarely the right move. Instead, the goal is to find a balance. A portfolio for someone in their 60s typically includes a healthy allocation to bonds and cash for stability and income, but it retains a meaningful position in stocks to provide the necessary long-term growth. This helps ensure your savings can support you throughout a long and active retirement.
Investing in Your 70s and Beyond
In your later retirement years, the focus is on making your money last and funding your lifestyle, while perhaps thinking about the financial legacy you want to leave. Your portfolio should be structured to provide a reliable stream of income. However, the threat of inflation is real, and you still need a portion of your investments to grow. A common guideline for retirees is the 60/40 portfolio, with 60% in stocks and 40% in bonds, but your personal situation will dictate the right mix. The key is to maintain a diversified portfolio that provides income and stability through bonds while capturing growth through stocks, ensuring your financial security for years to come.
Personalize Your Strategy: Key Factors to Consider
While age-based models provide a solid framework, they are just the starting point. A truly effective investment strategy is deeply personal and goes beyond your birth year. Think of it as a custom-tailored suit versus one off the rack—it should fit your unique financial situation, goals, and even your personality. To build a portfolio that truly works for you, you need to look at the bigger picture. This involves a thoughtful assessment of your comfort with risk, your specific timelines, and your income requirements.
At Waterloo Capital, we believe that the most successful investment plans are the ones designed for an individual, not a demographic. By considering these key personal factors, you can move from a generic model to a tailored investment solution that aligns perfectly with your life. Let’s walk through the essential elements that will help shape your personalized asset allocation strategy.
Assess Your Risk Tolerance
Your risk tolerance is your financial and emotional ability to withstand market ups and downs without making panicked decisions. While your age often helps determine how much risk you’re comfortable with, it’s not the only factor. As you get closer to retirement, you might naturally want to take less risk, but your personal comfort level is just as important. Are you someone who checks your portfolio daily, or do you prefer a set-it-and-forget-it approach? Understanding your investment temperament is crucial for building a strategy you can stick with for the long haul.
Define Your Time Horizon
Your time horizon—the length of time you have until you need to access your money—is one of the biggest factors in your investment strategy. The longer your time horizon, the more risk you can generally afford to take because your portfolio has more time to recover from any potential downturns. For example, if you’re saving for retirement in your 30s, you have decades to ride out market volatility. However, if you’re saving for a down payment on a house you plan to buy in two years, your strategy should be much more conservative to protect your principal.
Clarify Your Income Needs
Your need for income from your portfolio will significantly influence your asset allocation, especially as you approach and enter retirement. It’s a delicate balance. You need investments that can generate a steady stream of cash flow to cover living expenses, but you also need growth to protect your purchasing power from inflation. Even after age 70, you need some growth in your investments to make sure your money lasts. A portfolio that is too conservative might not generate enough returns to support your desired lifestyle over a 20- or 30-year retirement, so finding the right mix of income and growth assets is key.
Consider Current Market Conditions
While you should never let short-term market noise dictate your long-term strategy, it’s wise to be aware of the broader economic environment. Current conditions can present both opportunities and risks. For instance, shifting interest rates can affect the attractiveness of bonds, while sector-specific trends might influence your equity allocation. As people get closer to retirement, they tend to take less risk because they have less time to recover from market drops. Staying informed with professional research and insights can help you make strategic adjustments without straying from your core financial plan.
Build Your Age-Appropriate Portfolio
Once you understand the principles of asset allocation, it’s time to put them into practice. Building a portfolio that aligns with your age and goals isn’t about finding a secret formula; it’s about applying a few core strategies thoughtfully. Think of it as creating a personalized blueprint for your financial future. By focusing on proven models, staying flexible, diversifying properly, and truly understanding your own comfort with risk, you can construct a portfolio that works for you at every stage of life. These four pillars will help you create a solid foundation for your investment strategy.
Explore Traditional Allocation Models
A great starting point for thinking about your portfolio is a traditional allocation model. You might have heard of rules like the “100 minus your age” rule, which suggests subtracting your age from 100 to determine the percentage of stocks you should hold. While simple, these models offer a clear principle: your allocation between stocks and bonds should reflect your risk tolerance and time horizon. As a Financial Samurai article notes, “The proper asset allocation of stocks and bonds by age is important to achieve financial freedom.”
Consider Dynamic Allocation
Your investment strategy shouldn’t be static. A dynamic approach means you actively adjust your asset mix as your circumstances and the market change. This is especially important as you approach major life milestones. For instance, as you get closer to retirement, you have less time to recover from market downturns, so a strategic shift is necessary. This often involves reducing risk to protect the capital you’ve accumulated. This proactive management helps ensure your portfolio continues to align with your evolving financial needs, moving from a primary focus on growth to one that includes wealth preservation.
Diversify Your Holdings
Diversification is a fundamental strategy for managing investment risk. The core idea is simple: don’t put all your eggs in one basket. By spreading your investments across various asset classes—like domestic and international stocks, bonds, real estate, and alternatives—you can cushion your portfolio against volatility. As Vanguard explains, “if one investment goes down, others might stay steady or go up, helping to balance things out.” Proper diversification helps create a more stable path toward your financial goals, smoothing out the inevitable bumps along the way and giving your portfolio resilience.
Manage Your Risk
Before you invest a single dollar, it’s essential to get clear on your personal risk tolerance. This is more of a personal reflection than a financial calculation. Ask yourself: How comfortable are you with watching your investment values fluctuate? Your answer is a critical piece of your financial puzzle because it directly influences the right mix of assets for you. Understanding your own comfort level with market ups and downs helps you build a portfolio you can stick with, even when the market is volatile. Working with financial professionals can help you accurately assess your risk profile and align your investments accordingly.
Manage Your Portfolio Through Every Life Stage
Building a portfolio based on your age and goals is a fantastic first step, but it’s not a one-and-done task. Think of your investment strategy like a garden; it needs regular attention to thrive. Over time, market movements will cause some of your investments to grow faster than others, shifting your portfolio away from its intended design. Life events, like a promotion or a new family member, can also change your financial picture.
Managing your portfolio is an ongoing process that helps you stay on course toward your long-term goals. It involves a few key practices that, when done consistently, can make a significant difference in your outcomes. By regularly rebalancing your assets, planning for tax efficiency, and keeping a close eye on costs, you can maintain a healthy and effective portfolio that evolves with you. These habits help you stick to your plan, reduce unnecessary risk, and keep more of your hard-earned returns.
Rebalance Your Portfolio Regularly
Rebalancing is the process of realigning your portfolio back to its original target asset mix. For example, if your goal is a 60/40 split between stocks and bonds, a strong year for the stock market might push your allocation to 70/30. This shift means your portfolio is now taking on more risk than you originally planned. To rebalance, you would sell some stocks and buy more bonds to return to your 60/40 target.
This discipline forces you to buy low and sell high. You’ll trim positions that have performed well and add to those that have lagged. Checking your portfolio annually or whenever your allocation drifts significantly from your target is a great way to stay aligned with your long-term strategy and risk tolerance. Different asset allocation models can serve as a guide for setting your initial targets.
Invest for Tax Efficiency
It’s not just about what your investments earn; it’s about what you get to keep after taxes. Tax efficiency involves making smart decisions to minimize the amount of taxes you pay on your investment gains. One powerful strategy is to use tax-advantaged retirement accounts like 401(k)s and IRAs. Within these, you might consider a Roth account. Contributions to a Roth IRA are made with after-tax dollars, but your money grows tax-free, and you won’t have required minimum distributions in retirement.
For your taxable brokerage accounts, you can practice tax-loss harvesting—selling investments at a loss to offset gains elsewhere. It’s also wise to hold less tax-efficient assets, like high-dividend stocks or certain bonds, inside your tax-advantaged accounts. A thoughtful approach to asset location can significantly reduce your tax bill over time.
Keep Investment Costs in Check
Investment fees might seem small, but they can have a surprisingly large impact on your portfolio’s growth over decades. Even a seemingly minor 1% fee can consume a substantial portion of your returns. That’s why it’s so important to understand and manage the costs associated with your investments, such as expense ratios on mutual funds and ETFs.
When building your portfolio, look for low-cost options like index funds, which often have very low annual fees. Choosing funds with minimal yearly fees helps you hold onto more of your money, allowing it to compound more effectively. While some actively managed funds may justify their higher costs with strong performance, always be mindful of the fees you’re paying and make sure the value you receive is worth the price.
Balance Income Generation and Wealth Preservation
As you approach and enter retirement, your financial goals naturally shift. The primary focus moves from accumulating wealth to making it last. This creates a delicate balancing act: you need your portfolio to generate enough income to support your lifestyle, but you also need to preserve your capital and ensure it continues to grow. Relying on a portfolio that is too conservative can be risky. If the market experiences a downturn early in your retirement or if inflation runs high, an overly safe strategy might not produce the returns needed to sustain you for the long haul.
The key is to find a middle ground that allows for continued growth without exposing your nest egg to unnecessary risk. It’s not about eliminating risk entirely—it’s about managing it intelligently. This means structuring your portfolio to provide a steady stream of income through dividends and bond yields while still holding assets, like stocks, that have the potential to grow your principal. This growth component is your best defense against inflation and longevity risk, which is the possibility of outliving your savings. A well-structured portfolio can help you feel confident that your money will support you through every year of your retirement.
Finding Your Growth vs. Income Mix
Determining the right asset allocation is fundamental to achieving your financial goals, especially as you get older. While younger investors can afford to take on more risk for greater growth potential, the objective in your later years is to blend capital preservation with continued growth. Your ideal mix of stocks and bonds will largely depend on your personal risk tolerance and financial situation. Even in your 70s, keeping some growth-oriented investments is crucial. The goal is to keep your savings safe for daily life while still allowing for enough growth to ensure your portfolio lasts as long as you do.
Protect Your Portfolio from Inflation
Inflation is a quiet but powerful force that can erode the value of your savings over time. A dollar today won’t buy as much in ten or twenty years, and a portfolio that doesn’t keep pace with rising costs is effectively losing money. Misunderstanding inflation’s impact is a common pitfall that can lead to flawed asset allocation for retirees. To protect your purchasing power, your investment returns need to consistently outpace the rate of inflation. This is why maintaining a stake in growth assets like equities is so important, as they have historically provided returns that exceed inflation over the long term.
Plan Your Financial Legacy
A thoughtful investment strategy looks beyond your own needs to consider the financial legacy you want to leave behind. This long-term perspective reinforces the importance of smart diversification. Don’t just divide your assets between stocks, bonds, and cash. True diversification involves spreading your investments within each category. For example, you might hold stocks from different industries, of various company sizes, and in different countries. This approach helps reduce risk because if one sector or region struggles, your entire portfolio isn’t pulled down with it. A well-diversified portfolio is more resilient and better positioned to support your long-term financial objectives.
Monitor and Adjust Your Portfolio
Creating your asset allocation strategy is a huge step, but it’s not a “set it and forget it” task. Your portfolio is a living part of your financial plan, and it needs regular attention to stay healthy and aligned with your goals. As your life evolves and markets shift, your investment mix will likely need to change, too. Think of it like routine maintenance for your car—a periodic check-up ensures everything is running smoothly and gets you where you want to go.
Monitoring your portfolio doesn’t mean you need to watch the market every day. Instead, it’s about establishing a rhythm for reviewing your investments and making thoughtful adjustments when necessary. This proactive approach helps you stay on track, manage risk, and adapt to new circumstances without making emotional decisions. By building in time for these reviews, you can ensure your portfolio continues to serve your long-term financial vision.
Set a Review Schedule
Checking your portfolio regularly is key to keeping your investments aligned with your target asset mix. Over time, some of your investments will grow faster than others, causing your allocation to drift. For example, a strong year for stocks could leave you with a higher equity percentage than you originally planned. A consistent review schedule—whether it’s quarterly or annually—gives you a dedicated time to rebalance your portfolio. This often means selling some assets that have performed well and buying more of those that have underperformed, bringing you back to your desired balance.
Adapt to Major Life Changes
Significant life events often signal a need to revisit your investment strategy. Getting married, changing careers, welcoming a child, or preparing to pay for college can all impact your financial goals, time horizon, and risk tolerance. For instance, if your job becomes less stable or a large expense is on the horizon, you might decide to temporarily shift more of your portfolio into less volatile assets like bonds. These moments are natural checkpoints. Taking the time to assess how your financial plan should adapt to your new reality ensures your investments continue to support your life’s journey, not complicate it.
How to Respond to Market Shifts
It’s easy to feel anxious during periods of market volatility, but it’s crucial to avoid making rash decisions based on short-term fluctuations. Successful investing is a long-term game, and emotional reactions to market news can derail even the most well-thought-out plan. Instead of reacting to daily headlines, stick to your long-term strategy. Use market shifts as an opportunity to review your goals and confirm your asset allocation is still appropriate. Staying informed through credible market insights can help you maintain perspective and make adjustments based on strategy, not fear.
Key Goals for Each Life Stage
Your financial goals aren’t static; they evolve as you move through life. The investment strategy that works for a 25-year-old just starting out will look very different from the one a 65-year-old needs to generate retirement income. Understanding the key objectives for each phase helps you align your asset allocation with what matters most at that moment, whether it’s aggressive growth, wealth preservation, or a steady cash flow. Let’s walk through the distinct goals that define each stage of your financial journey.
Early Career: Focus on Growth
When you’re in your 20s and 30s, your greatest asset is time. This is a crucial time to start saving because your money has many decades to grow, allowing you to take advantage of the power of compounding. Your primary goal is to build a strong foundation for the future. Since you have a long time until retirement, you can generally afford to take on more risk for the potential of higher returns. The focus should be on stocks, as they offer strong potential for long-term growth, and you have plenty of time to recover from any short-term market ups and downs. Your contributions, no matter how small they seem now, are incredibly impactful over the long run.
Mid-Career: Balance Competing Priorities
Your 40s and 50s are often your peak earning years, but they can also be the most financially complex. You might be juggling a mortgage, saving for your children’s education, and trying to increase your retirement savings all at once. You’re likely earning more now, so you might be able to put more money toward retirement. This is a crucial time to check your progress. As a general guideline, you can aim to have saved three times your income by age 45. A key goal during this stage is to max out contributions to your retirement accounts whenever possible. While growth is still important, you may start to introduce more bonds to your portfolio to add stability.
Pre-Retirement: Secure Your Position
As you approach your 60s, your focus shifts from wealth accumulation to wealth preservation. The main goal is to protect the nest egg you’ve worked so hard to build. Now is the time to look at all your savings and plan how you’ll take money out to cover your living costs in retirement. If your savings aren’t quite where you want them to be, you might consider delaying retirement. Working a few more years can make a significant difference in your final savings balance. It’s also important to review your investments. Retirement can last 30 years or more, so your money still needs to grow to outpace inflation. Your portfolio should reflect a more conservative stance, but not an absence of growth potential.
Retirement: Plan for Consistent Income
Once you’ve retired, your primary objective is to make your money last. Even after age 70, you need some growth in your investments to ensure your portfolio can support your lifestyle and keep up with rising prices. A portfolio that is too safe might not generate enough income. Your asset allocation should be designed to provide a reliable stream of income while still allowing for modest growth. A popular method to manage this is the “bucket strategy,” where you divide your money into different accounts based on when you’ll need it—short-term, mid-term, and long-term—each with a corresponding level of risk.
Avoid These Common Asset Allocation Mistakes
A well-designed asset allocation strategy is your roadmap to financial goals, but even the best plans can be derailed by common missteps. These aren’t just rookie mistakes; they can trip up even experienced investors who might overlook a simple detail or let emotions guide their decisions. Understanding these pitfalls is the first step toward building a more resilient and effective portfolio. It’s about moving beyond simple formulas and creating a strategy that truly reflects your personal circumstances, from your age and risk tolerance to your specific income needs. The goal is to create a plan that works for you through changing market conditions and life stages.
By sidestepping these common errors, you can keep your portfolio aligned with your long-term objectives and avoid taking on unintended risks. Many of these mistakes stem from misconceptions about how investing works over time or from a “set it and forget it” mentality that fails to account for natural market movements. Being aware of these issues can help you and your advisor make more informed decisions. We believe that a proactive approach, grounded in a clear understanding of potential risks and behavioral biases, is fundamental to long-term success. Let’s explore a few key areas where investors often go wrong.
Errors Tied to Your Age
It’s easy to fall back on generalizations about age and investing. Younger investors sometimes believe the power of compounding means they can contribute less and still come out ahead, but this overlooks the massive advantage of starting with larger, consistent contributions. Another common slip-up is simply forgetting to invest. Research from Vanguard shows that many investors under 25 leave a significant portion of their retirement accounts in cash, often after making a contribution or rollover. This uninvested cash misses out on potential market growth entirely. The key takeaway is to be intentional, no matter your age. Make sure your contributions are actively invested according to your strategy.
Overlooking Key Risks
When we think of investment risk, we often picture market volatility. However, some of the biggest threats to your portfolio are quieter. Inflation, for example, can steadily erode the purchasing power of your returns, a critical concern for anyone planning for or living in retirement. Another frequent mistake is confusing your age with your time horizon. Your time horizon should be the primary factor in your asset allocation. A 65-year-old planning for a 30-year retirement has a much longer time horizon than their age might suggest. Acknowledging these nuanced risks is essential for building a durable financial plan, which is why we provide ongoing research and insights to our clients.
Letting Your Portfolio Get Unbalanced
Even a perfectly constructed portfolio won’t stay that way on its own. As the market moves, some of your investments will grow faster than others. This natural process, known as portfolio drift, can slowly push your asset allocation away from its original targets. For example, a portfolio that was once a 60/40 split between stocks and bonds could become a 70/30 split after a strong year for equities, exposing you to more risk than you intended. That’s why it’s so important to rebalance your portfolio regularly. Periodically checking your investments and adjusting them back to your target allocation keeps your strategy aligned with the goals we establish with our clients.
Related Articles
- Asset Allocation Examples for Every Life Stage
- How to Build an Investment Strategy for Advisors
- 5 Essential Hedge Fund Strategies for Advisors
Frequently Asked Questions
Why is asset allocation considered more important than picking individual stocks? Think of asset allocation as the blueprint for your financial house. It determines the overall structure and stability by deciding how much you put into foundational categories like stocks and bonds. Picking individual stocks is more like choosing the furniture. While important, the furniture won’t matter much if the foundation isn’t solid. Your asset allocation has a much larger impact on your long-term results because it manages your overall risk and sets the stage for consistent growth.
Is there a simple rule for figuring out how much I should have in stocks? A classic guideline you might hear is the “100 minus your age” rule, which suggests subtracting your age from 100 to find the percentage you should hold in stocks. While it’s a decent starting point for thinking about risk, it’s far from a perfect formula. A truly effective strategy is personal. Your ideal stock allocation depends more on your specific financial goals, your time horizon, and how comfortable you are with market swings.
Once I’m retired, should I move all my money out of stocks and into safer investments? This is a common misconception, but moving completely out of stocks is rarely the right move. Retirement can easily last 20 or 30 years, and your savings need to continue growing to outpace inflation and support your lifestyle. The goal isn’t to eliminate risk entirely but to shift your balance. Your portfolio should still include a healthy portion of stocks for long-term growth, complemented by more stable assets like bonds to provide income and reduce volatility.
How often should I be checking and adjusting my portfolio? You don’t need to watch your portfolio daily. A better approach is to schedule a check-in once or twice a year. The goal of these reviews is to see if your asset mix has drifted away from your original targets due to market movements. If it has, you can rebalance by selling some of what has done well and buying what has lagged. You should also revisit your strategy after any major life event, like a career change or a new family member.
What should I do with my investments when the market is volatile? It’s natural to feel nervous when the market gets choppy, but the best course of action is usually to stick with your long-term plan. Emotional decisions driven by scary headlines can do more harm than good. Market downturns are a normal part of investing. Instead of reacting, use these moments as a reminder to review your goals and confirm that your asset allocation still aligns with your strategy and comfort level with risk.