The passage of time feels like it creeps, then pounces: Suddenly, party conversation focuses on real estate, how we’re going to bed earlier and our realization that we have no idea what type of jeans to wear. For years, millennials have been the butt of financial jokes: “They spend all their money on lattes and avocado toast!” and “Why don’t they get a minimum wage job to pay for college like I did?” But the clichés got old quickly.
And now, as millennials move deeper into their 30s and 40s, there are some things to consider changing up. Most notably, our investments.
For those lucky enough to invest early on, the advice was pretty standard: Invest often, and invest in aggressive assets to take advantage of long-term growth. The target-date funds held in 401(k)s were typically calibrated to higher-risk investments. Maybe the most aggressive of us dipped our toes in crypto and meme stocks at some point. After all, you’ve got all the time in the world to ride out the highs and lows of the market when you’re 24.
But now, we’re more mature. And with that wisdom comes new responsibilities, like adjusting our asset allocation. Asset allocation is just a fancy phrase for what percentage of your portfolio is in each investment. For example, a 20-year-old’s investment portfolio of $100 (for easy math), might be 90% in stocks and 10% in bonds, or $90 and $10, respectively. As you get closer to retirement, it’s a good rule of thumb to shift that allocation to a less risky position, such as 60% stocks and 40% bonds, though the exact percentages will depend on your personal situation.
“In general, as we get older we tend to take fewer risks,” says Aaron Hatch, a certified financial planner and founder of Woven Capital in Redding, California. “In your early 20s, when you have nothing to lose and time on your side, you can afford to take all kinds of risks. However, as we millennials accumulate assets in our 401(k)s and elsewhere, and we inch toward retirement, it might be worth considering taking a little risk off the table by slightly decreasing exposure to stocks or other risky investments.”
