Different age groups, different asset allocations
What kinds of financial choices do Vanguard investors make? We spent 5 years studying 5 million investor households to find answers to this fascinating and important question. Looking at what other investors are doing can be a helpful benchmark as you make decisions about your own portfolio. It’s how we can all learn from each other on this investing journey.
Our research shows that the average Vanguard investor’s portfolio holds 63% stocks, 16% bonds, and 21% cash.
We also found an interesting difference in the way investors approach their asset mix based on their age. If you’re under age 39, your portfolio is more likely to be heavily weighted towards stocks. In fact, this age group allocates nearly 90% of their portfolio to them. By comparison, people over age 55 only hold about 66% of their assets in stocks.
This checks out. There’s a rule of thumb in the investment industry that says you should reduce your exposure to equities as you get closer to your goal. So if your goal is saving for retirement, you should shift your holdings away from riskier investments like stocks, and towards safer ones like bonds or cash, as you get closer to your target retirement age.
While it’s fascinating to look at averages and trends, remember: You’re not the average investor. It’s important to decide on your own goals, time horizon, and risk tolerance, and settle on an asset mix that’s right for you. That’s how we become stronger investors together.
All investing is subject to risk, including the possible loss of the money you invest. Investments in bonds are subject to interest rate, credit, and inflation risk.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Diversification does not ensure a profit or protect against a loss.