Many people have been trained to think that simply because they are getting older that they should be more conservative with their investments.
I guess Warren Buffett didn’t get the message…
But, in my opinion, getting too conservative – especially too soon – can lead to big risks down the road. Most often the risk is a slow, persistent reduction in the quality of your life or, even worse, running out of money all together.
There are two factors at work that can make investing too conservatively risky:
People are living longer lives.
The cost of living continues to rise.
Many years ago, the age of 65 years was the finish line for a successful career. At that point, you rode off into the sunset with your pension to enjoy your remaining years, often not much past the age of 70. Today, pensions are a tale of the past and because of advancements in medicine, technology, and wellness 65-year-olds of even average health still have a lot of life to live.
And, for what it’s worth, Naples has been recognized for many years in a row as one of the “happiest and healthiest cities” in America. Maybe it’s the sunshine, maybe it’s the pickleball, or maybe its relaxing lifestyle – either way it means more years of ever-increasing living costs.
So, what’s the takeaway?
If you’re 65 years old today, odds are that you are going to live to at least 80 years old. And, if you decide to fund this period of your life with your investment portfolio, then you’re going to need something that can go the distance – in some cases, more than 30 years! When you look at long-term investment horizons, one thing is clear: Stocks outpace both bonds and inflation over time.
While holding a meaningful allocation to stocks into your 60’s, 70’s, or 80’s may feel risky, then consider this:
What’s the risk of outliving your money?
Sources: Morningstar Direct and Wells Fargo Investment Institute. Data is from 1926 – 2023. This information is hypothetical and is provided for illustrative purposes only. It is not intended to represent any specific return, yield, or investment, nor is it indicative of future results. Performance results assume reinvestment of income and no transaction costs or taxes that would be applicable to an actual investment. An index is unmanaged and not available for direct investment. Index returns do not represent investment performance.
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Hypothetical and past performance is no guarantee of future results.
Hey, I’m Rob Edwards. Thanks for reading this month’s column.
As a nationally recognized advisor, I have one goal: To help
clients make more thoughtful and intentional money decisions so
that they can enjoy the best version of their life.
In working with high-net-worth families, I know that with more
money and prosperity comes complexity and the potential
for making mistakes.
So, whether you’re asking questions about saving for
retirement, transitioning your business, or how your money can
make the greatest impact, my team and I are here to help.
Rob Edwards
Managing Director – Investments
Senior PIM® Portfolio Manager
Edwards Group of Wells Fargo Advisors
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