Conventional wisdom has it that young people should invest most of their retirement money in stocks, because equities outperform bonds in the long term.
But Rob Arnott, CEO of money manager Research Affiliates, begs to differ.
"The thesis that young people have 40 years until they retire and so they should invest mostly in stocks makes intuitive sense, but it’s wrongheaded," he told
The New York Times. "There are lots of reasons not to go down that path."
Arnott cited a Fidelity Investments study showing that 41 percent of workers in their 20s and 30s liquidate their 401(k)s when they lose or leave their jobs.
That costs them their tax benefits plus a 10 percent early distribution penalty. It also can cost them market return if they withdraw their 401(k) funds at the wrong time. Arnott pointed out that the younger you are, the more likely you are to lose your job, so the risk is great.
Arnott advises younger people saving for retirement to allocate 40 percent of their portfolio to stocks, 40 percent to bonds and 20 percent to cash until the portfolio is roughly worth their annual take-home pay.
Meanwhile, you might be wondering how to handle your retirement investments in the wake of recent financial-market volatility.
"I am advising many retired clients to consider a more defensive posture in their retirement portfolio," Steven Gattuso, a senior portfolio manager at Courier Capital of Buffalo, told
MarketWatch.
"You still want to stay diversified so the adjustments that are currently recommend are tactical tweaks rather than wholesale portfolio changes."
Investors with an average risk tolerance and a time horizon of at least 10 years might consider reducing the duration of their fixed-income portfolio. That would provide some protection against rising interest rates.
"This can be done with funds or ETFs [exchange-traded funds] that focus on high quality shorter maturities or even adding floating rate products to the portfolio," Gattuso said.
© 2026 Newsmax Finance. All rights reserved.