Jorgen Vik: Adapt your investments to objectives, not to “rules” | Lifestyles


For 20 years as a financial advisor, I’ve heard and read reasons not to own stocks right now.

The two most common reasons can be the age of the investor and the risk of the stock.

By themselves, I think both are either bad arguments to avoid actions or misunderstandings.

Let me address age here and return to the risk argument another time.

You may have heard of a “100 minus” rule of thumb, which states that you subtract your age from 100 to arrive at your stock allocation in your investment portfolio.

This way, an 80-year-old investor would have 20% allocated to stocks.

For me, that’s way too broad. Rather than following universal rules like this, I think an investor should tailor their investments to their own goals.

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What if you have a million dollars paying $20,000 in dividends a year, but you need $10,000 to supplement your other sources of income?

This means that, without touching your capital, you should have more than enough to cover dividend taxes and meet your goals.

Could you then not leave the entire portfolio in a diversified equity portfolio?

I think you absolutely could.

Also, if you invest entirely in stocks, I think you improve your chances of growing your portfolio more than inflation over the long term.

This is the problem of avoiding actions; this can have consequences down the road, such as possibly having less purchasing power.

In other words, less money to cover medical expenses.

Less money to pass on to the next generation.

Less money to leave a legacy to organizations that you believe make the world a better place.

Goals aside, some may object to an 80-year-old investor having a long-term horizon.

Unless you have medical conditions that make 95 unlikely, I think you should be very open to the possibility of living 15 or more.

It’s long term, for me.

Ultimately, I suggest you let your own circumstances, rather your particular age, guide your investments.

Jorgen Vik is a certified financial planner and partner of SKV Group LLC.


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