the207life
Member
- Sep 15, 2013
- 56
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Less than 2 years of investment experience so looking to get peoples insight into what a good percentage of your holdings should be in Stocks vs Bonds in a Roth IRA.
I know the rule of thumb is to subtract your age from 100 and invest that percentage of your assets in stocks with the rest in bonds or cash which is what I have been doing since I opened my Roth. The reason I am starting to question my decision is I'm currently reading the "Intelligent Investor" by Benjamin Graham and in the commentary Jason Zweig asks the following question:
So while I have been following the fundamental rule of thumb with subtracting from 100, this claim seems to hold a lot of weight and really got me thinking. Now I'm not sure what side of the fence to jump... so out of curiosity what are you guys doing or what do you suggest for a 25 year old and why?
Sorry if this has been covered indepth before.
I know the rule of thumb is to subtract your age from 100 and invest that percentage of your assets in stocks with the rest in bonds or cash which is what I have been doing since I opened my Roth. The reason I am starting to question my decision is I'm currently reading the "Intelligent Investor" by Benjamin Graham and in the commentary Jason Zweig asks the following question:
Why should your age determine how much risk you can take? An 80-year-old with $3 million, an ample pension, and a gaggle of grandchildren would be foolish to move most of her money into bonds. She already has plenty of income, and her grandchildren (who will eventually inherit her stocks) have decades of investing ahead of them. On the other hand, a 25-year-old who is saving for his wedding and a house down payment would be out of his mind to put all his money in stocks. If the stock market takes an Acapulco high dive, he will have no bond income to cover his downside-or his backside.
What's more, no matter how young you are, you might suddenly need to yank your money out of stocks not 40 years from now, but 40 minutes from now. Without a whiff of warning, you could lose your job, get divorced, become disabled, or suffer who knows what other kind of surprise. The unexpected can strike anyone, at any age. Everyone must keep some assets in the riskless haven of cash.
So while I have been following the fundamental rule of thumb with subtracting from 100, this claim seems to hold a lot of weight and really got me thinking. Now I'm not sure what side of the fence to jump... so out of curiosity what are you guys doing or what do you suggest for a 25 year old and why?
Sorry if this has been covered indepth before.