By Elizabeth Trotta
Are investors acting their age?
A recent report from a broker-dealer suggests they might not be, at least when it comes to risk. Among participants in Fidelity’s corporate defined-contribution plans, nearly two thirds maintain asset allocations that are out of sync with the company’s risk standards for their age.
Most financial advisors and broker dealers recommend that investors take riskier bets with their savings while they are younger, and curb that risk as they age to avoid exposure to a potential market decline falling close to their retirement date.
Investors do not appear to be listening. About 64% of Fidelity defined-contribution plan participants do not hold assets that the firm considers age-based and appropriate for their risk tolerance, down slightly from 66.5% at the end of the first half of 2009.
Among the most common culprits were investors between the ages of 36 and 44, 63.7% of whom lacked age-appropriate investments, according to the company’s standard, and about 60% of pre-retirees (45 to 55) missed the company’s mark.
Young people fared better. The study showed that 40% of individuals under 30 were not invested appropriately for their age.
Recent data have shown that young investors may be too reticent to take on enough risk. A recent Merrill Lynch survey of affluent investors found that more investors under 34 described themselves as having a lower tolerance for risk than those in any other age group, except for people over 65, most of whom were retirees.
http://www.smartmoney.com/investing/mutual-funds/in-401k-planning-few-acting-their-age/#
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