Investors continually buy high and sell low which is why institutional managers still use a 60/40 portfolio.
https://www.etf.com/sections/index-i...ess?nopaging=1Retirees and those almost retired shouldn’t care what their highest level of risk tolerance is because they shouldn’t be investing anywhere near it. There is no economic reason for a person to take more investment risk than necessary once they’ve accumulated enough money for retirement. The focus should be on the minimum amount of risk needed to achieve an income required in retirement.
Claims that people will be less emotional when they have a longer time frame to invest are false and I haven't seen any empirical studies proving otherwise. A loss has a greater emotional impact than a win. As recent as March 2020 people who claimed to be in it for the long run began bailing on asset allocations they were in love with when stocks were rising. (And likewise, this is a big reason for the speculation today - people are trying to make up for bad decisions at the bottom after hearing nothing but the positive outcomes in the media.)
Allocating more to a particular fund because of past performance is performance chasing. Allocating more to a particular fund so your future goals don't go up in smoke is considered risk management.
Bookmarks