22-04-2025
Age-based investment advice: How to navigate stock market crashes at any age
President Trump's aggressive tariff proposals, revisions, delays and other shifts and intermittent bouts of uncertainty have unnerved investors, as underscored by a nearly 20% decline in leading stock market indicators in the days after he disclosed the first round of new import taxes on April 2.
The swift reshuffling of the financial landscape has many people wondering if they should make changes to their investment holdings. The answers may differ, depending on your age and how far along you are in your career.
Young adults (ages 18 to 35 or so)
People in this age group should view the current tumult as a learning experience. It won't be the last stock market meltdown in their lives and could prove to be a great opportunity to get into stocks, preferably using diversified portfolios such as mutual funds and exchange-traded funds.
If you aren't yet participating in your 401(k) plan, get started now, especially if you can take advantage of free money in the form of matching funds, which many employers offer.
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A key concept to understand for people in this group is that of dollar-cost averaging, or making relatively small purchases on a consistent basis, through thick or thin, said Steven Conners of Conners Wealth Management in Scottsdale. That's what you do with a 401(k) plan, as a small portion of each paycheck goes into the investments that you have selected.
Middle-range investors (ages 36 to 50 or so)
People in this group also can afford to maintain a relatively aggressive investment posture focused largely around stocks, stock funds and the like. So too for pouring money into the market, as you still will have many years, probably decades, to make up losses.
Conners suggests 'target-date' funds so you don't need to think about rebalancing all the time. These funds hold mixes of stocks and bonds that start out aggressive (mostly with stock holdings) and gradually grow more conservative over time.
Most large mutual-fund families offer target-date portfolios. Investment researcher Morningstar last year identified what it considers some of the best.
Pre-retirement investors (ages 51 to 64 or so)
People in this group typically should invest a bit more conservatively, with higher weightings to bonds and less to stocks. A traditional 60-40 mix might make sense. This is a portfolio allocated roughly 60% to stocks and 40% to bonds.
One common rule of thumb is to hold a percentage equal to 100 minus your age in stocks.
So, if you're 55 years old, you would hold 45% of your overall mix in the stock market and the rest in bonds or money-market funds.
But you also could go a little more aggressive, with perhaps 110 minus your age, or 55% in stocks for someone who is 55. Part of this different tweak reflects longer life expectancies, which puts more pressure on an investment portfolio to deliver sound results over time.
With this in mind, U.S. Bank generally recommends holding 90% or more in stocks if in your 20s, 80% or so in your 30s, roughly 70% for those in their 40s, 60% for people in their 50s, and so on.
Retirement-age investors (65 or so and up)
Many people in this group shouldn't be in the stock market at all, especially at older ages such as in the 80s or 90s.
While the stock market historically has recovered from prior swoons within a couple of years, if not sooner, stock holdings might not be worth the stress for this demographic. Conners, for example, recommends conservative investments such as fixed annuities, and there are other choices.
Still, the general admonition against stocks for retirees doesn't fit all sizes. For example, many older Americans have plenty of wealth and can afford to invest somewhat aggressively, especially if they want to pass along their assets to heirs or charities.
While age influences investment decisions, it's not the only consideration. Wealth levels, access to other income sources such as Social Security, access to retirement accounts at work, personal debt levels and investment sophistication also play important roles.
Over time, your investment holdings — part of your net worth — should greatly outweigh your salary and other annual income.
For example, fund company T. Rowe Price suggests that someone at age 45 should have a retirement balance three times that of their current income, yet someone by age 55 should have a balance that's seven times that of income.
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