January 12, 2012 by tfroberts

Younger people with long time horizons should have one type of portfolio; high growth, small cap stocks, emerging market and other "risky" stuff. Middle-aged people should have more bonds and large cap value funds. Senior citizens should have mostly bonds and cash. Less risky investments. Is this true?

Sorry, it's another myth. For example, younger investors would have done a lot better over the past decade with lots of bonds. Today, older investors putting most of their money in "safe" bonds may be making another mistake. Ten-year Treasury bonds yield 2% and 30-year bonds less than 3%. Retirees who hold lots of "safe" U.S. government bonds are losing purchasing power to inflation. Just like back in the seventies and early eighties.

The truth is, no one can rely on such simple rules. It depends on your needs. What if you are older but your investments are targeted to provide for your grandchildren in 20 years. Should you be in cash or bonds? Probably not the best mix. You are not the "average" investor, spend some time getting your investments right for you.