Gone Fishing Retirement

Investment Strategy by Age

If you are in your 20s and your parents are near retirement, do you think you should have different investment strategies? Of course you should!

The Early Years

Through your twenties and well into your thirties, you are a long way from needing your retirement income. When you have a 30-40 year horizon until you retire, you can invest in risky investments that have a potential for longer term growth.

At this point in your life, I would invest heavily in equities (stocks). It is a good idea to diversify; you should consider mutual funds and index funds rather than picking individual stocks. A mix of US large cap, US small cap, international, and emerging market equities should make up virtually your entire portfolio.


From your 40s into your 50s, you should transition away from risky investments, such as small cap stocks and emerging markets should be a smaller focus. At this point, the large ‘blue chip’ stocks, index funds, and fixed income investment (bonds) should be your focus.

Why the change in strategy? Large cap stocks and fixed income investments are less volatile than small cap and international stocks. Because you are now 10-20 years from retirement, you can’t afford the time to bring everything back if there is a major drop in your portfolio. You can still take some risk, but it should be more calculated.

You should be mixed between equity and fixed income at this point, with a slight favorability toward the large cap stocks and index funds.

Nearing Retirement

As your late 50s and 60s come up, you should be retreating to even more stable investment options. Of course, treasury bonds will not grow as much as a stock might grow, but you can’t afford big losses in your portfolio as you near retirement.

At this point, solid blue chip stocks and index funds should make up a small portion of your portfolio while fixed income and government bonds make up the bulk of your holdings. Keeping some cash on hand is also a good idea for security.

The Golden Years

You are done with work. Mazel tov! As you enjoy a new life filled with golf and grandkids, you can’t afford to see your net worth take a hit regardless of what is happening in the markets. You can’t deal with volatility.

Move away from stocks completely, or make them a very, very small part of your portfolio. Government bonds should be the bulk of your investment holdings. You should also keep a healthy cash cushion with zero risk.

Balance Risk and Return Goals

I have always been somewhat risk averse, but that does not mean I do not take risk. I am willing to buy into foreign stocks and emerging markets due to the potential for growth, but I don’t want to see a big loss so that is a smaller holding for me.

What I think my Dad should do and what I think I should do are very different. You have to decide for yourself exactly what the right mix should be, but know that higher risk can lead to higher returns, but it is called risk for a reason.

What is your investment strategy for your retirement fund? Please share in the comments.

This post was originally published on November 11, 2011 and updated on April 1, 2021


13 thoughts on “Investment Strategy by Age”

  1. I am 5.5 years away from retirement.  I started shifting funds into some fixed investments such as TIPS.  I am in an unusual situation since I will have a good portion of my retirement from Social Security and a pension. 

    1. Us young folks can’t count on pensions and social security to the same extent as those nearing retirement now. I imagine we will still have social security, but it will look different than today. I had about $2,000 from a pension go to my IRA when I left my last employer, so no pension in my future.

  2. Very nicely explained Eric!  Take calculated risks.  Would be foolish to be fully invested in stocks when you are nearing retirement, and the reverse is true as well.  You could miss out on potential gains if you are invested purely in CDs or bonds when you are young.

  3. My investment strategy is to NOT LOSE MONEY! haha.  i.e. Capital preservation.  I don’t want to get crunched again.  

    My other investment strategy is to just rely on nobody but myself.  

    1. Whenever you invest, you are relying on the company, bank, or financial institution to do a good job to ensure your investment goes up.

      1. Agree, which is why it’s so maddening sometimes, and why management is so important!  So much due diligence is put towards meeting management.  Something us little guys have no access to. S

  4.  I like this straightforward approach explaining to people what kind of investments they should be looking at at what age. I’m sure it happens a lot that people end up investing in something and don’t adjust their asset allocation as they age.

    1. If you are not disciplined enough to manage it yourself, there are mutual funds that take care of the asset allocation based on a specific target retirement date.

  5. We are retired & have our investments in a portfolio that is geared to our ages. 
    You can get into a fund like that at any age.  It’s easy & all the allocation changes are done for you automatically.    Works for us.

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