How Do I Choose the Right Investment Mix?
Written by Joe Snyder

Wednesday, October 24th, 2018

Q: How do I choose the right investment mix?

A: This is one of my favourite questions, because it actually has a standard answer.

If you've read my other posts, you'll know that oftentimes investing questions have no clear cut answer that can apply for everyone. There's rarely one solution, and we're often left choosing between one seemingly good option over another. The challenge is that when presented with two good options (like paying down your mortgage versus saving for retirement), sometimes we spend way too much time trying to choose the perfect option rather than just choosing either of the two options and doing it.

When it comes to choosing the ideal investment mix in your portfolio, there's a handy rule of thumb that I find really helps: 100 minus your age. But first, a quick refresher.

Asset Class Refresher

Let's start by remembering that there are three main types of asset classes to invest in, each serving a different purpose in your portfolio.

1) Cash – provides a source of liquidity. Examples include: a high interest savings account, short-term GIC, or money market mutual fund.

2) Fixed Income – provides regular interest income payments, and serves as the "defence" in your portfolio. Examples include: bonds or long-term GICs.

3) Equities – provides the growth your portfolio needs, serving as the "offence" in your portfolio. Example: stocks.

100 – Age Rule

This is one of the longest-standing rules of thumb out there for choosing an appropriate asset allocation (investment mix).

Here's how it works: when saving for your retirement, hold fixed income assets equal to your age, with the remainder in equities. So, if you're around 40, that means you're invested in roughly 40% fixed income and 60% equities (100 – 40 = 60).

The reason why this rule of thumb is useful is that as you get older (and therefore closer to retirement), you won't want to expose your nest egg to as much risk. Your portfolio will become more conservative, eventually weighting heavily toward fixed income as you near and enter retirement.

How I Use the 100 – Age Rule

As with all rules of thumb, it's important to remember that this should just be a guide – that's it. It's more of a starting place rather than a strict set of rules to follow. This means that you don't literally need to reduce your exposure once per year and add that one percent to your bond portfolio. It's more important to just gradually get more and more conservative over time. So whether you're 36 years old or 45, you'll want to have roughly 40% in bonds and 60% in stocks in your retirement portfolio. I personally think adjusting this allocation every 5 years is frequent enough.

Investing for Less than 5 Years?

While the 100 – Age rules works for retirement savings, it doesn't work for every goal. This is super important. With that in mind, here's another easy-to-follow rule of thumb:

Saving for something 5 years out or less? You'll want to stay away from stocks. High interest savings accounts, GICs and high quality bonds (or bond funds) are completely acceptable investment choices.

If you're going to be using the money in the next 5 years or less, then you'll want to steer clear from investments with a lot of volatility. And that rules out stocks. You won't make much money on your short-term investments, but at the same time, that's not your goal. Your goal is for the money to be there when you need it in the next few years.

Final Thoughts

While the 100 – Age rule is indeed just a guideline, it's an easy one to follow that will help make sure that your portfolio is never too aggressive. Having a proper asset allocation is one of the top factors in determining your portfolio's performance, along with keeping an eye on fees and ignoring market noise.


If you have a question Joe can answer in a future article or have a topic suggestion, please email it to:

This article is intended to provide general information only about investing. If you need further information about your specific circumstances you should speak to an investment advisor.

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