The answer is the percentage of your investments that should be in stocks or stock mutual funds.
This rule became popular in the 1970s and ’80s with the emergence of retirement plans, as individuals tried to come up with a handle on asset allocation without necessarily trying to conquer the subject matter.
In practice, this rule is severely flawed, failing to look at the whole picture. Everything from life expectancy to age at retirement, from amount invested to expected returns and much more, affects a portfolio’s ability to last a lifetime. Most advisers seem to think this rule is ultraconservative and would be more comfortable if the number were readjusted to 130 or 140.
“This rule has completely outlived its usefulness because people are retiring younger and living longer,” says Peg Eddy of Creative Capital Management in San Diego. “People are retiring with 20 years or more to live, and a portfolio that is too conservative just isn’t going to work for them. They need more growth, or they will be too vulnerable to inflation over that longer stretch of time.”
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