Thanks for the comment/feedback.

There are typically two main asset allocation strategies — market-based and client-based. Market-based reacts to prevailing market trends. The most popular client-based asset allocation models include age-based (which you’ve mentioned), strategic (base on risk tolerance), and graduated (modified version of the age-based). Here’s an example of the graduated model: if the investor is 35 years away from retirement, the portfolio typically would start with 85% in equities and gradually pull down to 25% by age 65.

Of course, the million-dollar question is — what is the difference between these three? If you plug in $10,000 in the retirement calculator going back to 1900 using the historical performance date for the S&P 500 index as a proxy for equity performance, there’s vitually no difference in the outcome between these three strategies! It goes without saying — there’s more than one way to invest, or as some people would say “there’s more than one way to skin a cat”.

I have one basic tip for your readers. I agree with this rule of thumb that I’ve been hearing a lot lately: If an investor subtracts his/her age from 120, the answer is the percentage of retirement money the person should have in stocks. For example, I am 26, so I should have approximately (120-26) 94% of my retirement money in stocks. This way, as retirement nears, one’s portfolio will be less and less aggressive.