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Investing over the Life Cycle: One Size Doesn't Fit All

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  • Timothy Sablik

Abstract

Financial advisers commonly recommend that young individuals invest more heavily in risky assets than safer assets. Because of their long time horizons, young investors can expect that long-run gains on risky assets typically will outweigh short-term losses. However, the Fed's Survey of Consumer Finances shows that young people generally do not follow this advice. Instead, they invest little or nothing in risky assets initially and increase their holdings gradually as they approach retirement. Economists find that accounting for other risks that young people face can help explain this behavior.

Suggested Citation

  • Timothy Sablik, 2014. "Investing over the Life Cycle: One Size Doesn't Fit All," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue Oct.
    • Handle: RePEc:fip:fedreb:00020
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