Cut Stocks or Add to Them? A Key Dilemma for Your Retirement Plan
The 'right' glide path depends on what you're trying to achieve--and your attitude toward risk and volatility.
If there's one generally accepted principle in the realm of asset allocation, it's that young people with a long runway to retirement should start out with equity-heavy portfolios and only gradually transition to holding more in safe investments.
The basic idea is that young savers have many working years ahead of them, so they don't need to hold much in the way of safe investments; their salaries can supply their spending needs. But as retirement approaches, holding an allocation to safe investments like cash and bonds becomes more critical. How the portfolio's ratio of stocks relative to safe assets like cash and bonds changes over time is often referred to as a "glide path."