The ‘100 minus your age’ rule

The 100 minus your age rule is another asset allocation rule — 100 minus your age gives you the percentage in equities with the balance going into low-risk bond assets.

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The ‘100 minus your age’ rule.

The ‘100 minus your age’ rule is another asset allocation rule. 100 minus your age gives you the percentage in equities with the balance going into low-risk bond assets.

For example, at age 20 you need 80% equity and 20% bonds. For age 50, equity comes out at 50% and bonds 50%. The idea is that as you get older you move out of equities and into lower risk bonds. Advisors call this de-risking or life styling. Received wisdom is that in later life having a high proportion of equities creates a hazard to income, if the short term value of the portfolio suddenly moves up or down in value as a fund can’t recover.

It’s like being forced to sell equities when markets are down… you don’t want to do it! Thankfully, managing your pension is now much more sophisticated with short, medium and long term portfolios the norm, rather than having all the money in one portfolio. Medium and long term pots can, therefore, have higher exposure see the 72 and 10,5, 3 rules.