If you're 200 miles from your destination, you're likely on a highway driving 65(ish) mph.
If you're 2 miles from your destination, you're likely on a city street driving 30 mph.
And if you're pulling into your driveway, 5 mph or slower feels right.
As you get closer to your destination, you drive slower and slower until you come to a safe stop.
Smart financial planning is just like safe driving. The closer you get to your financial goal (retirement, college, down payment), the slower you should be going.
The "speed" of your portfolio is determined by the ratio of stocks and bonds. Stocks are fast, bonds are slow.
A 30 year-old driving down the highway should have 90% stocks and only 10% bonds.
A 60 year-old driving down the city street should be around 50/50.
And an 80 year-old pulling into the driveway should be closer to 25/75 stocks to bonds.
(To be clear, I do not mean buying stocks of individual companies. Your "serious" money should be invested in low-cost, index stock or bond funds.)
You can drive a little faster or a little slower. Just make sure you’re driving at a speed appropriate for the road you're on.
Pulling into your driveway at 65 mph is not a great idea.
Disclaimer: This article is for educational purposes only and should not be considered financial, tax or legal advice. These statements have been simplified for illustration purposes. Consult your financial planner or tax advisor for help with your specific situation.