Ken Fisher's Debunkery – BUNK 4: AGE EQUALS ASSET ALLOCATION

There are thousands of books, seminars, and graduate theses on asset allocation Ken Fisher notes. While professionals, academics, and amateurs have myriad different and frequently competing views on asset allocation, various popular prescriptions are driven entirely by age. For example, Ken Fisher looks at the popular saying: Take 100 (or 120), subtract your age, and that is the percentage you should have in stocks. Friends: Age is a factor, but by itself is not enough.

Is Age All That Matters?

If age were all that mattered, Ken Fisher provides the example that then two gentlemen aged 75 with similar - sized portfolios should have nearly the same asset allocations — always! If you are a financial-services professional, maybe you like this idea. First, it is less work for you — your client’s age becomes the singular driver, and that is easy to figure out. Second, it provides you with cover. Clients can’t complain you steered them wrong on allocation because you followed a simplistic equation. Neat!

If you have read Ken Fisher's Bunk 3, you already sense the age factor alone is wrong. Why should people with different goals, income needs, return expectations, family situations, life expectancies, you-name-it, have allocations determined just by their ages alone? Age is a factor, but just one. And the asset-allocation decision is vital — it determines your portfolio's benchmark — or what you are trying to accomplish with your portfolio.

Read more details of BUNK 4, including how to determine your benchmark, in Ken Fisher’s Debunkery.