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The Economic Perspective: “Investment Rules”

This is Mary Walden with economist MW, welcoming you to the economic perspective. Today’s
program looks at investment rules. Mike, a big question for individuals regarding their investments is how their collection of investments should change as they age. What’s the standard advice, and is it followed?

a. Standard advice is that as a person ages, they should put more of their investment funds in safer
b. For example, using stocks as the riskier investment and bonds as the safe investment, someone who is 30 might have 20% of their money in bonds and 80% in stocks; someone age 60 would have the reverse
c. Reasoning is as we age, there is less time for the riskier investments to rebound from a drop
d. But for younger people, there is more time for a rebound, and so will grow portfolio faster with
riskier, yet higher return, stocks
e. In reality, data show people don’t follow this advice – in fact, latest data show older investors have a higher percentage in stocks
f. Means there are other determinants at work
g. I’m MW

And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the
Department of Agricultural and Resource Economics