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You are an investment advisor. A 35 year old client comes to you with $100,000 to...

You are an investment advisor. A 35 year old client comes to you with $100,000 to invest. What asset classes and what amounts would you advise for this client's portfolio? Why? And does your advice change if the client is 60 years old? Why?

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Answer #1

A 35 year old has a very long time horizon of investment and does not depend on the portfolio income for their living expenses. Thus, they have an above average ability to take risk. The advice would be to invest a large proportion of the portfolio in equities (around 65%) and the rest in bonds (around 35%). This is because equities have higher risk, but also provide higher returns.

A 60 year old has a short time horizon of investment and will depend on the portfolio income for their living expenses. Thus, they have a below average ability to take risk. The advice would be to invest a small proportion of the portfolio in equities (around 30%) and the rest in bonds (around 70%). This is because bonds have lower risk and provide regular income

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