06 Oct 2022
The ‘100 minus age’ rule, is a classic guideline on how to allocate money across equity and fixed income.
Investors must simply subtract their age from 100 to arrive at an approximate equity allocation, with fixed income accounting for the rest. This ensures investors have higher equities at a younger age and vice versa.
Young investors have age on their hands and are better placed to build wealth via equities, which is a long-term proposition as they have a higher risk appetite. As they get older, they get more risk averse and prefer stable and regular income.
100 – Your Age = Equity Allocation
- 30’s : 70% Equity (Equity MF’s, Alt Investments, Stocks.) 30% Debt (Debt MF’s, FD, Bonds etc)
- 50’s: 50% Equity (Equity MFs, Alt Investments, Stocks.) 50% Debt (Debt MF’s, FD, Bonds etc)
- 70’s: 30% Equity (Equity MFs, Alt Investments, Stocks.) 70% (Debt MF’s, FD, Bonds etc)
Mutual Fund are subject to Market risks, read all scheme related documents carefully. The information provided is generic in nature and is for informational purpose only. Please consult your financial advisor before taking any decision.
Read more
-
Disclaimer
See AlsoSocial Security HistoryThe contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
Leave a Comment
Thanks for submitting your details.
As an investment expert with a deep understanding of financial principles and strategies, I can confidently discuss the "100 Minus Age Rule" mentioned in the article titled "Banking Mantra > Thursday Thoughts > Infographics > The 100 Minus Age Rule > 06 Oct 2022."
The '100 Minus Age' rule is a fundamental guideline for asset allocation, balancing equity and fixed income investments based on an individual's age. This approach ensures a strategic allocation of assets, taking into account the changing risk appetite and financial goals over the course of a person's life.
The formula is straightforward: 100 minus your age equals the recommended equity allocation percentage, with the remainder allocated to fixed income. This principle is grounded in the idea that younger investors, with more time ahead, can afford to take on higher risks and benefit from the long-term growth potential of equities. As investors age, the rule acknowledges a natural shift towards a more conservative approach, prioritizing stability and regular income associated with fixed-income investments.
Let's break down the specific allocations suggested in the article for different age groups:
-
Investors in their 30s:
- Equity Allocation: 100 - 30 = 70%
- Debt Allocation: 30%
Recommended investment options include Equity Mutual Funds (MFs), Alternative Investments, and Stocks for equity, and Debt MFs, Fixed Deposits (FD), and Bonds for debt.
-
Investors in their 50s:
- Equity Allocation: 100 - 50 = 50%
- Debt Allocation: 50%
Similar investment options as mentioned for the 30s age group.
-
Investors in their 70s:
- Equity Allocation: 100 - 70 = 30%
- Debt Allocation: 70%
The recommended investment options remain the same for both equity and debt.
The article emphasizes that these allocations are guidelines, and individual circ*mstances may vary. It also includes a disclaimer about the generic nature of the information, advising readers to consult their financial advisors before making any decisions.
The mention of "Equity MF’s, Alt Investments, Stocks" for equity and "Debt MF’s, FD, Bonds" for debt highlights the diverse range of financial instruments available for investors to consider within each asset class.
In conclusion, the '100 Minus Age' rule serves as a valuable tool for investors to structure their portfolios based on age-appropriate risk and return profiles, aligning with their financial goals and risk tolerance.
