Age and Equity
The age-based formula for allocating investments between equity and debt is commonly used to balance risk and returns. Here’s how it works:
Formula:
(100 – Your Age) = Percentage to invest in Equities
Your Age = Percentage to invest in Debt
Example Allocations:
1. At age 30:
70% in Equity (100 – 30 = 70)
30% in Debt
2. At age 50:
50% in Equity (100 – 50 = 50)
50% in Debt
3. At age 60:
40% in Equity (100 – 60 = 40)
60% in Debt
Age and equity
Rationale:
Equities are high-risk, high-return investments suitable for younger investors with a longer time horizon.
Debt instruments are safer, providing stability as you grow older and closer to retirement.
Age and equity
Adjustments:
You can modify the rule based on:
Risk Tolerance: If you’re more risk-averse, use 110 – your age for equity allocation.
Goals: Younger investors with aggressive goals may increase equity exposure.
Would you like help creating a tailored investment strategy?