Conceptually, investors are thought be more risk-tolerant at younger ages and more risk-averse as they age. In fact, this idea is built into many asset allocation strategies and provides the structure for target-date mutual funds. But is it still valid?
Based on recent data, financial advisors may want to reassess age-based risk exposures because younger investors are growing more risk-averse, while older investors are growing more risk-tolerant.
This finding is contained on page 27 of the 2011 Investment Company Fact Book published by the Investment Company Institute (ICI). You can access it here: www.ici.org/pdf/2011_factbook.pdf
- In 1998, 30 percent of investors younger than age 35 said they were willing to take above-average or substantial risk. By 2010, the percentage had shrunk to 22 percent.
- In 1998, 6 percent of investors age 65 or older said they were risk-takers. By 2010, the percentage had increased to 10 percent.
As the age gap narrows, keep in mind that there also is a gender gap. Surveys consistently show that women are less willing to take substantial risk than men. One age-based size clearly does not fit all investors' need for personal risk exposure.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.