Breaking down the average portfolio mix by investor age

Breaking down the average portfolio mix by investor age

Key takeaways

  • 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%).
  • Investors in their 20s, 30s and 40s all have a bond allocation of less than 6%.
  • Investors in their 20s, 30s and 40s all maintain about a 41% allocation of U.S. stocks and about 9% allocation of international stocks in their financial portfolios

10.24.2023

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 DashboardTM, 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.

Age

U.S. stocks

International stocks

20s

$76,824

$9,429

30s

$139,639

$22,452

40s

$253,942

$43,357

 

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.

Age

U.S. stocks

International stocks

50s

$372,364

$64,477

60s

$356,845

$65,559

 

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.

Age

U.S. stocks

International stocks

70s

$247,645

$39,774

80s

$196,042

$24,795

90s

$145,292

$13,183

 

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.

Age

U.S. stocks

International stocks

20s

89.07%

10.93%

30s

86.14%

13.85%

40s

85.41%

14.58%

50s

85.24%

14.76%

60s

84.48%

15.52%

70s

86.16%

13.83%

80s

88.77%

11.22%

90s

91.68%

8.31%

 

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:

Age

U.S. bonds

International bonds

70s

11.39%

2.04%

80s

11.05%

1.81%

90s

9.97%

1.32%

 

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

Age

Median allocation of alternatives

Percentage of alternatives in overall portfolio

20s

$2,968.90

3.30%

30s

$5,863.29

3.25%

40s

$11,628.84

3.38%

50s

$18,104.35

3.48%

60s

$20,007.25

3.76%

70s

$14,360.66

3.74%

80s

$8,733.45

3.48%

90s

$4,227.52

3.17%

 

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.

*Anonymized user data from the Empower Personal Dashboard™ as of October 2023. This data analysis only includes a subset of our free tools users. Following is the list of exclusions: limited to users that logged in in the past year; excludes accounts that are deleted, test, or invalid/bogus; also excludes those who are trading on margin (i.e. borrowing money to invest, leaving them with a “negative” cash holding); and excludes outliers with asset values greater than 10M in any asset category (e.g. cash, bonds). 

Asset allocation, diversification, dollar-cost averaging and/or rebalancing do not ensure a profit or protect against loss.

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Beau Simon

Contributor

Beau Simon is a Financial Advisor at Empower. Beau first discovered an interest in investing and financial planning while attending California Polytechnic University, San Luis Obispo, where he served as the Director of Research and Investment for the Cal Poly Investing Club. Beau is particularly interested in Bitcoin, value investing, behavioral economics, impact/ESG investing and teaching financial literacy. In his spare time he enjoys soccer, skiing, and reading.

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