Dale Jackson

Personal Finance Columnist, Payback Time

Follow|Archive

Whether you want to admit it or not, we’re all getting older. Things we once considered fun might seem a little risky now. After all, in most cases, the years have given us more to lose.

That changing view of the world also applies to investing. We can take risks, and if they fail, there is plenty of time to recover. If risky investments go well, there’s more to compound over the years.

Eventually, wealth accumulation turns into wealth preservation and over the years, the asset mix in your portfolio should reflect that.

The most obvious shift from investing to risk management is reflected in how assets are split between equities and fixed income. Equities tend to generate high returns with the most risk, which makes them good for investors with long time horizons. Most investment grade bonds and other fixed-income products are relatively safe but offer little yield in these days of low interest rates. That level of safety comes in handy for investors in or near retirement, when the time to withdraw the funds is near.  

The exact split between equity and fixed income depends on the individual’s situation but CIBC provides a typical asset allocation to make the point.

• Still sort of carefree in your 30s: 70 per cent stock, 20 per cent bonds
• Maturing in your 40s: 60 per cent stocks, 25 per cent bonds
• Looking toward retirement in your 50s: 55 per cent stocks, 30 per cent bonds

Adjusting your portfolio to reflect your age is something best discussed with a financial advisor. While preservation takes priority over accumulation over time, the portfolio must always grow to meet retirement goals. It is possible to be too safe.