What type of asset allocation might a middle-aged person prefer?

What type of asset allocation might a middle-aged person prefer?

• A. 70% bonds, 30% stocks
• B. 50% stocks, 50% bonds
• C. 100% stocks
• D. 20% stocks, 80% bonds

Answer: (B)

A middle-aged person typically seeks a balanced approach to asset allocation, reflecting a blend of growth and risk management as they plan for retirement and aim to preserve wealth. The selection of a 50% stocks and 50% bonds allocation represents a moderate risk strategy that allows for potential growth through equity investments while still maintaining some stability with fixed-income securities. This balanced allocation is prudent for someone in this age group, as they have a mix of both time to recover from market downturns and an immediate need to maintain sufficient capital to support their lifestyle. Furthermore, with a focus on retirement on the horizon, this asset mix takes into account the need to safeguard investments while still positioning for growth. Investing solely in stocks or a high percentage of stocks could expose the middle-aged investor to unnecessary risk, especially in market downturns. On the other hand, a heavier weighting in bonds, while providing stability, might not yield enough growth to keep pace with inflation and their long-term financial goals. Therefore, the balanced approach offered by the 50% stocks and 50% bonds allocation is considered ideal for someone navigating this significant life stage.

A middle-aged person typically seeks a balanced approach to asset allocation, reflecting a blend of growth and risk management as they plan for retirement and aim to preserve wealth. The selection of a 50% stocks and 50% bonds allocation represents a moderate risk strategy that allows for potential growth through equity investments while still maintaining some stability with fixed-income securities.

This balanced allocation is prudent for someone in this age group, as they have a mix of both time to recover from market downturns and an immediate need to maintain sufficient capital to support their lifestyle. Furthermore, with a focus on retirement on the horizon, this asset mix takes into account the need to safeguard investments while still positioning for growth.

Investing solely in stocks or a high percentage of stocks could expose the middle-aged investor to unnecessary risk, especially in market downturns. On the other hand, a heavier weighting in bonds, while providing stability, might not yield enough growth to keep pace with inflation and their long-term financial goals. Therefore, the balanced approach offered by the 50% stocks and 50% bonds allocation is considered ideal for someone navigating this significant life stage.