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Daily Capital

Breaking Down the Average Portfolio Mix by Investor Age

KEY FINDINGS

  • Investors in their 20s park a higher percentage of their assets in cash (28.4%) than any other age group except retirees in their 80s (29.4%) and 90s (31%).
  • Investors in their 20s, 30s and 40s all have a bond allocation of less than 5%.
  • Investors in their 20s, 30s and 40s all maintain about a 43% allocation of U.S. stocks and 11-12% allocation of international stocks in their financial portfolios.

 

Investors’ financial portfolios change over time alongside their income, expenses, and retirement horizon.

But by how much? In what ways? Specifically, what does the average investor’s financial portfolio look like broken down by age and asset allocation?

To find out, we decided to dig into our platform intelligence.*

Portfolio Size by Age

It’s not surprising that as investors age, the size of their portfolio grows, on average, until they reach retirement age. At this point, the size of the average financial portfolio starts to slowly decline.

Things get interesting when we delve into how the average investor’s portfolio assets are allocated.

According to anonymized Personal Capital data, younger investors in their 20s park a higher percentage of their assets in cash (28.4%) than any other age group except retirees in their 80s (29.4%) and 90s (31%). The median cash balance in the portfolios of those in their 20s is $31,589. Investors in their 30s keep 25.4% of their portfolio assets in cash (median cash balance: $53,377).

This might be due to the relative inexperience of many young people when it comes to investing and their aversion to taking on investment risk. However, by keeping so much of their financial assets in low-yielding cash instruments like savings and money market accounts, young investors might be missing out on opportunities to take advantage of long-term compounding to grow their portfolios.

Read More: How to Save for Retirement

Stock Allocations by Age

Young and middle-aged investors keep a relatively high percentage of their portfo lio assets in stocks.

Investors in their 20s, 30s and 40s all maintain about a 43% allocation of U.S. stocks and 11-12% allocation of international stocks in their financial portfolios.

The median value of stocks in portfolios for these age groups is as follows:

AGE U.S. STOCKS INTERNATIONAL STOCKS
20s $79,690 $13,878
30s $140,186 $31,366
40s $281,459 $62,421

 

Investors in their 50s and 60s keep between 39% and 42% of their portfolio assets in U.S. stocks and about 10% in international stocks.

The median value of stocks in portfolios for these age groups is as follows:

AGE U.S. STOCKS INTERNATIONAL STOCKS
50s $432,740 $93,509
60s $459,189 $101,852

 

Older investors in their 70s and over keep between 37% and 39% of their portfolio assets in U.S. stocks and between 6% and 9% in international stocks.

The median value of stocks in portfolios for these age groups is as follows:

AGE U.S. STOCKS INTERNATIONAL STOCKS
70s $406,707 $80,307
80s $343,837 $60,530
90s $287,948 $37,581

 

Home Country Bias by Age

Home country bias refers to investors’ tendency to favor companies from their own country over those from other countries or regions. Home country bias is a worldwide phenomenon because investors are inclined to value local companies and brands over foreign ones.

Investors in their 20s maintain a high percentage (85.2%) of U.S. stocks relative to stocks from other regions. Investors in their 30s through 60s tend to be more geographically diversified with between 81.7% and 82.2% of their stock exposure in the U.S.

Older investors tend to have the highest home country bias. Investors in their 80s have 85% of their stock exposure in the U.S., and investors in their 90s have 88.5% of their stock exposure in the U.S.

AGE U.S. STOCKS INTERNATIONAL STOCKS
20s 85.2% 14.8%
30s 81.7% 18.3%
40s 81.8% 18.2%
50s 82.2% 17.8%
60s 81.8% 18.2%
70s 83.5% 16.5%
80s 85.0% 15.0%
90s 88.5% 11.5%

 

Bond and Alternative Asset Allocations by Age

Younger investors hold a much lower percentage of their portfolio assets in bonds than middle-aged and older investors. Those in their 20s, 30s and 40s all have a bond allocation (both domestic and international) of less than 5%.

Investors in their 50s have a total bond allocation (domestic and international) of 9.1%, while the total bond allocation of investors in their 60s is 13.9%

For older investors, bond allocations are as follows:

AGE U.S. STOCKS INTERNATIONAL STOCKS
70s 12.5% 2.5%
80s 12.7% 2.3%
90s 12.4% 1.8%

 

Meanwhile, the average allocations and median amounts of alternative assets in financial portfolios according to age are as follows:

AGE AVERAGE ALLOCATIONS MEDIAN AMOUNTS
20s 3.4% $3,005
30s 3.3% $6,205
40s 3.5% $13,705
50s 3.6% $22,695
60s 4.0% $30,175
70s 4.3% $28,765
80s 3.9% $22,020
90s 3.9% $15,504

 

Tips for Improving Your Portfolio Mix

Asset Allocation

One of the most important keys to creating a financial portfolio that likely generates sustainable long-term returns is choosing the right asset allocation based on your investing goals, timeframe and risk tolerance. Your portfolio should be well-diversified, with the appropriate mix of assets across the main asset classes of stocks, bonds, cash equivalents and alternative investments for you.

Portfolio Rebalancing

It’s also important to rebalance your financial portfolio periodically. Over time, market movements can shift your asset allocation so that it is no longer in line with your objectives.

For example, due to rises in stock prices this year, stocks might make up a higher percentage of your portfolio than you intend. To bring your portfolio back into balance, you could sell some of your stock positions and use the proceeds to purchase assets in the other classes, such as cash equivalents and bonds.

Portfolio Monitoring

Free online tools can help you monitor the performance of your portfolio holdings. With Personal Capital’s Investment Checkup tool, you can:

  • Assess your level of risk tolerance
  • View a target asset allocation based on your risk and investing time horizon
  • Compare your current portfolio allocation to your ideal target allocation

Using the Fee Analyzer, you can also uncover hidden fees in your investment portfolio.

Get Started

*This data analysis only includes a subset of our free tools users. Following is the list of exclusions: limited to users that logged in in the past year; excludes accounts that are deleted, test, or invalid/bogus; also excludes those who are trading on margin (i.e. borrowing money to invest, leaving them with a “negative” cash holding); and excludes outliers with asset values greater than 10M in any asset category (e.g. cash, bonds).

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Beau Simon is a Financial Advisor at Personal Capital. Beau first discovered an interest in investing and financial planning while attending California Polytechnic University, San Luis Obispo, where he served as the Director of Research and Investment for the Cal Poly Investing Club. Beau is particularly interested in Bitcoin, value investing, behavioral economics, impact/ESG investing, and teaching financial literacy. In his spare time he enjoys soccer, skiing, and reading.
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