The Little Book of Common Sense Investing [PDF]

Summary
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The Little Book of Common Sense Investing Book

I hardly intended such an age-based rule of thumb to be rigidly applied. For example, surely many young investors beginning their first full-time jobs might as well regularly invest not 75 percent, but 100 percent of their savings in equities during those early years of investing. And zero percent in equities is likely a dubious goal for a new centenarian. (We will have lots more centenarians as time goes on.)

Continually selling equities by such an investor to reduce the stock allocation might not make much sense, especially if you consider the potential for large taxes on capital gains that are realized when stocks with substantial appreciation are sold. A flexible age-based plan comports with our common sense.

But the many studies that have been done to validate the wide variety of similar (but more precise and more complex) allocation strategies have a common flaw: they are based on past returns on bonds and on stocks, neither of which seem likely to be repeated in the coming decade.