Over time, a person’s financial portfolio changes over time alongside income, expenses and retirement horizon. But by how much? In what ways?

Specifically, what does the average investor’s financial portfolio look like broken down by age and asset allocation? To find out, we decided to dig into our platform data.*

Portfolio size by age

It’s not surprising that as investors age, the size of their portfolio grows, on average, until they reach retirement age. At this point, the size of the average financial portfolio starts to slowly decline. Things get interesting when we delve into how the average investor’s portfolio assets are allocated.

According to anonymized data from Empower Personal Dashboard^TM, younger investors in their 20s place a higher percentage of their assets in cash (31.5%) than any other age group except retirees in their 70s (34.9%), 80s (39%) and 90s (41.7%). The median cash balance in the portfolios of those in their 20s is $39,785. Investors in their 30s keep 27.7% of their portfolio assets in cash (median cash balance: $59,081).

This large cash holding may be due to younger investors’ relative inexperience and potential risk aversion. However, by keeping so much of their financial assets in low-yielding cash instruments like savings and money market accounts, young investors may be missing opportunities to take advantage of long-term compounding to help grow their portfolios.

Stock allocations by age

Young and middle-aged investors keep a relatively high percentage of their portfolio assets in stocks.

Investors in their 20s, 30s and 40s all maintain about a 41% allocation of U.S. stocks and 9% allocation of international stocks in their financial portfolios.

Investors in their 50s and 60s keep between 35% and 39% of their portfolio assets in U.S. stocks and about 8% in international stocks.

Older investors in their 70s and over keep between 31% and 33% of their portfolio assets in U.S. stocks and between 5% and 7% in international stocks.

Home country bias by age   

Home country bias refers to investors’ tendency to favor companies from their own country over those from other countries or regions. Home country bias is a worldwide phenomenon because investors tend to value local companies and brands over foreign ones.

Investors in their 20s, 30s and 40s maintain a high percentage of U.S. stocks relative to stocks from other regions (89%, 86% and 85%, respectively). Investors in their 50s and 60s are slightly more geographically diversified, with between 84% and 85% of their stock exposure in the U.S.

Older investors tend to be among those with the highest home country bias. Investors in their 80s have 88.7% of their stock exposure in the U.S., and investors in their 90s have 91.6% of their stock exposure in the U.S.

Bond and alternative asset allocations by age

Younger investors hold a much lower percentage of their portfolio assets in bonds than middle-aged and older investors. Those in their 20s, 30s and 40s all have a bond allocation (both domestic and international) of less than 6%.

While investors in their 50s have a total bond allocation (domestic and international) of 8.9%, the total bond allocation of investors in their 60s is 13.1%.

For older investors, bond allocations are as follows:

Meanwhile, the average allocations and median amounts of alternative assets in financial portfolios according to age are as follows:

Tips for improving your portfolio mix

Asset allocation

An important aspect of creating a financial portfolio that helps generate sustainable long-term returns is choosing the right asset allocation based on your investing goals, time frame and risk tolerance. Your portfolio should be well-diversified, with the appropriate mix of assets across the main asset classes of stocks, bonds, cash alternatives and alternative investments.

Portfolio rebalancing

It’s also important to review your financial portfolio periodically and rebalance when needed. Over time, market movements can shift your asset allocation so it is no longer in line with your objectives.

For example, when stock prices rise, stocks might make up a higher percentage of your portfolio than you intend. To bring your portfolio back into balance, you could sell some of your stock positions and use the proceeds to purchase assets in other classes, such as cash alternatives and bonds.

Portfolio monitoring

It's important to regularly monitor the performance of your portfolio holdings. Be sure to assess your risk tolerance, consider your target asset allocation based on that risk level and retirement horizon, and compare your current portfolio to your target. This helps ensure you’re staying on track with the portfolio that meets your needs.