Have you ever heard about the “100 minus age” thumb rule?
NO?
The rule says that you subtract your age from 100 to arrive at the ideal asset allocation for your investments. So, if you are 30, then 100-30 would give 70, which is the percentage of equity you can have in your portfolio. That is, you have Equity: Debt in 70:30 ratio. For someone who is 35, the rule will suggest 65 percent (= 100 - age 35) as the equity allocation. This rule is majorly used to calculate retirement corpus.
One major problem with this rule is that it simply assumes that age alone decides a person’s asset allocation. This not true. Factors such as investor’s risk appetite, goal timelines,tax, and return requirements are the major factors that decide asset allocation as well.
Wait...Wait...Wait...
The rule says that you subtract your age from 100 to arrive at the ideal asset allocation for your investments. So, if you are 30, then 100-30 would give 70, which is the percentage of equity you can have in your portfolio. That is, you have Equity: Debt in 70:30 ratio. For someone who is 35, the rule will suggest 65 percent (= 100 - age 35) as the equity allocation. This rule is majorly used to calculate retirement corpus.
One major problem with this rule is that it simply assumes that age alone decides a person’s asset allocation. This not true. Factors such as investor’s risk appetite, goal timelines,tax, and return requirements are the major factors that decide asset allocation as well.
Wait...Wait...Wait...
