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Dale Jackson

Personal Finance Columnist, Payback Time


Ah, the good old days. Looking back on your younger days, you might shudder to think of how you could risk everything for some sort of objective. That’s probably because you had much less to lose.

Investing is the same way. It’s okay to take risks when you have plenty of time to recover if it goes wrong, and the rewards are so sweet when it goes right. As we get older, and we have more to lose, it becomes more a question of preserving what we have.

That’s where age-appropriate investing comes in. CIBC provides guidelines on how portfolio assets should be allocated to your stage in life. Exactly how they should be allocated depends on the individual’s tolerance for risk and their goals. As a general rule the portion of equities, which tend to produce the best returns with the biggest risks, should get smaller over time. At the same time, the portion of fixed income and cash, which produce the lowest returns with the least risk, should grow.

Each investor should discuss age-appropriate investing with their advisor, but CIBC provides sample asset allocations for different age groups. The examples are based on couples with kids, but would work for single people, too.

In your 30s: two children; the oldest is five. Your RRSP portfolio totals $75,000 and you're adding $5,000 a year to it.

  • Stocks    70%
  • Bonds     20%
  • Cash       10%

In your 40s: children are teenagers. RRSP balance is now $150,000 and you are adding $10,000 a year to it.

  • Stocks    60%
  • Bonds     25%
  • Cash       15%

In your 50s: children are grown up. RRSP portfolio has reached $250,000 and you are contributing the maximum to your plan each year.

  • Stocks    55%
  • Bonds     30%
  • Cash       15%

As you get older, income becomes more important because you are closer to a time when you will need to withdraw your savings for daily expenses. However, if your portfolio is too heavily tilted towards fixed income, the returns may not be high enough to keep up with inflation or your retirement goals.