What assets should I hold at 20, 30, 40, 50, 60 & 70+?

I like a rule of thumb. It can make a complicated investing decision feel far easier to get your head around.

Whether you’re starting out or have been investing for a while, one question many of our customers wrestle with is what mix of assets, such as shares, bonds, cash and property, they should hold – and whether that mix should change over time.

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If you’ve ever wondered how your portfolio might change through your 20s, 30s, 40s, 50s, 60s and beyond, the ‘rule of 100’ offers one simple starting point. But, like any rule of thumb, it’s meant as a guide… not as a hard and fast rule.

How does the rule of 100 work?

It’s really simple. Subtract your age from 100. And your answer is the percentage you might hold in shares in your portfolio – either directly or through equity funds, which invest in a range of company shares. The rule then suggests that the remaining amount could be held in bonds, cash or other lower– risk assets.

So, if you’re 40, you take 40 away from 100, which gives you 60. Under the ‘rule of 100’ it would mean, you might therefore hold 60% in shares and 40% in bonds and cash.

The thinking behind it is that younger investors usually have more time to ride out the stock market’s inevitable ups and downs. As you get older – and potentially closer to needing the money – you gradually reduce the amount held in shares.

Here’s what this looks like over the ages:

^{Note: These figures are illustrative only. They are not a recommendation or a definitive asset allocation for any particular age.}

Age is only part of the picture

The rule is appealing because it’s so straightforward. But life – and investing – is rarely quite that linear.

A 30-year-old saving for a house deposit they’ll need in three years could have less capacity for investment risk than a 70-year-old whose essential spending is covered by a defined benefit pension or an annuity.

The more useful question is often not simply “How old am I?”, but “When will I need this particular pot of money?”

Your goals, income needs and attitude to risk all matter when weighing up the mix of investments that you hold. So does the way your portfolio is diversified (across regions and industry sectors for example). Holding 60% in shares spread across different countries, sectors and companies is very different from putting 60% into one or two individual company shares.

And when it comes to retirement…. beware the temptation to de-risk too early

There can be an understandable temptation to move most – or even all – of your money out of shares when you retire.

But retirement doesn’t bring your investing time horizon to an abrupt end.

Office for National Statistics projections show that a 65-year-old woman in the UK in 2024 could expect to live for another 22.7 years on average, while a man of the same age could expect another 20 years. By 2049, those figures are projected to rise to 24.6 years for women and 22 years for men¹.

If you’re interested in what this might mean for you, you can use the ONS life expectancy calculator here.

For many people, this means their money will need to support them well into their 80s or 90s. And de-risking too far, too soon can create a different kind of risk: that your investments don’t grow enough to keep pace with inflation or fund the retirement you want. Retirement can last for decades, so many people may still need some exposure to growth assets. The right balance could therefore be very different from the one suggested by age alone.

Someone in their 70s may also have several different time horizons. Money needed for next year’s bills might be held in cash. Money for later in retirement could remain invested in bonds and shares. And money intended as an inheritance may have an even longer investment horizon.

That’s why the ‘100 minus your age’ rule is best treated as a rough-and-ready guide. With life expectancy rising and retirements often lasting longer, some investors prefer the '110 minus your age' or '120 minus your age' rule, which can result in a higher allocation to shares and greater exposure to long-term growth.

• Looking for personalised financial advice? Our advisory service can help you plan for your next step.

Questions to ask before changing your portfolio

The right asset mix should balance your need for stability today with your need for growth tomorrow. So, before automatically reducing your share allocation with every birthday, it’s worth asking yourself the following questions:

• What am I investing this money for?
• When am I likely to need it?
• How much of my spending is covered by secure income?
• How would I react if my portfolio fell sharply?
• Do I want to spend the money, pass it on – or some combination of both?

My take on the 100 minus your age rule

I think I’ll finish up close to where we began… the ‘100 minus your age’ rule is useful because it makes asset allocation feel simple.

But it isn’t definitive. At 70, a 30% allocation to shares could be appropriate for some people, too high for others and nowhere near enough for someone with a long-time horizon and plenty of secure income.

Your age matters. But so do your goals, circumstances, income needs and attitude to risk.

After all, the aim isn’t simply to make your money last. It’s also to give yourself the confidence to enjoy it – hopefully while you’re still healthy, active and able to make the most of it.

Use it as a guide. Just not blindly.

• Read: What is asset allocation: the basics
• Read: How long should I invest for? And why?
• Read: How to choose an investment fund

Source:

¹ ONS - past and projected period and cohort life tables

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.