How to Keep Your Portfolio from Turning into a Museum Exhibit
When I was 25, I believed I was invincible. I wore loud shirts, ate questionable street tacos with impunity, and invested in tech stocks as if they were scratch-off lottery tickets. I bought a stock called “eConnect” simply because it had a lowercase ‘e’ in front of it. I didn’t even know what it did. To this day, I still don’t. But that didn’t stop me from buying 200 shares and watching it sink faster than my metabolism after 40.
Now, decades later, I’ve evolved. I wear quieter shirts, eat vegetables voluntarily, and have learned that my investment portfolio should evolve too.
Welcome, dear reader, to the concept of dynamic asset allocation—the fine art of making your money grow, then shift into something safer before it wanders off unsupervised and breaks a hip.
What Is Dynamic Allocation, Anyway?
Let’s start with what it’s not. Dynamic allocation is not:
- A jazzercise routine
- A high school group project
- That weird thing your cousin tried to sell you at Thanksgiving
No, dynamic allocation is simply adjusting your mix of investments—stocks, bonds, cash, and the like—as you age and your financial needs change. Think of it as tuning your financial radio. At 25, you blast heavy metal (aggressive growth stocks). At 65, you lean into soft jazz (dividend payers and bonds), with the occasional toe-tap to ABBA (REITs and covered call ETFs).
In technical terms, you start off with a “risk-on” approach (more stocks), and gradually slide toward a “risk-off” mix (more income and stability). But since this is not a finance textbook and you’re likely reading this with a cup of tea in one hand and a cat on your lap, let’s go with a simpler metaphor…
Your Portfolio as a Car
In your 20s and 30s, your investment car is a sporty little convertible with questionable brakes and a stereo that only plays Motley Crüe. It’s all go, no slow. You invest in growth stocks, emerging markets, crypto, and companies promising to put blockchain on breakfast cereal.
Then your 40s arrive, and suddenly your car gains seat belts, a baby seat, and something called “stability control.” Your portfolio now includes some bonds, index funds, and a vague fear of recessions.
By the time you hit your 60s and 70s, you’ve traded in the convertible for a reliable sedan that gets good mileage and reminds you when your blinker is still on. Your portfolio is now composed of dividend-paying stocks, high-quality bonds, and maybe an annuity or two that shows up with monthly income like clockwork.
Why Your Needs Change with Age
There are three big reasons your portfolio shouldn’t look the same at 70 as it did at 30:
- You’re Not Working Anymore
You’ve retired. Congratulations! You now have no income besides what your money earns for you. Your portfolio has become your financial spouse—supportive, hopefully dependable, and occasionally grumpy. - You Have Less Time to Recover from Mistakes
When you’re 30, you can lose half your net worth in a tech bust and still bounce back. At 70, you don’t have time for “bouncing.” You want your money to stay where it is—or at least move only gently, like an old dog on a sunny porch. - You Need Income
Gone are the days when you reinvested every penny. Now, your money needs to pay you. That means more dividends, more bonds, and fewer shares of companies trying to develop vegan uranium or whatever the kids are investing in.
What a Dynamic Allocation Might Look Like
There’s no perfect formula, but here’s one approach that doesn’t require an MBA or a decoder ring:
- Age 25–40:
- 80–90% stocks
- 10–20% bonds and cash
- Focus on growth, value, and maybe a small slice of international or emerging markets.
- Translation: Swing for the fences—but wear a helmet.
- Age 40–55:
- 60–80% stocks
- 20–40% bonds and cash
- Start shifting to more stable sectors—think utilities, healthcare, and dividend ETFs.
- Translation: Build the nest, but don’t forget to feather it.
- Age 55–70:
- 40–60% stocks
- 40–60% bonds, cash, and income-producing assets
- This is your “pre-retirement” warm-up stretch. You’re not quite retired, but your money should start acting like it is.
- Translation: Less roller coaster, more Ferris wheel.
- Age 70+:
- 30–50% stocks
- 50–70% bonds, annuities, REITs, and cash
- Focus on income, preservation, and staying sane.
- Translation: Keep it simple, stable, and spendable.
Real-Life Example: Me and My Three Buckets
At 70, I now use what’s called a bucket strategy—three “buckets” for my money:
- Bucket 1: Cash and short-term bonds for 1–2 years of spending. This is my “peace of mind” fund, otherwise known as “the reason I sleep at night.”
- Bucket 2: Intermediate-term bonds and dividend-paying stocks. This bucket refills Bucket 1 when needed and buys me time during market dips.
- Bucket 3: Long-term growth—mostly low-cost stock ETFs and REITs. This one gets to party a bit, but it’s not allowed to drink unsupervised.
This dynamic approach lets me adjust how aggressive or conservative I want to be, depending on my expenses, market conditions, and whether my grandson is about to ask for college money again.
A Few Tips From Someone Who’s Stepped on a Financial Rake or Two
- Don’t just “set it and forget it.”
Your needs change. So should your investments. Checking in annually doesn’t hurt, unless you do it right after a market crash—then it might involve cursing. - Don’t chase yield.
If something is offering a 12% dividend, it’s probably a trap. I once invested in an offshore shrimp company promising “guaranteed monthly payouts.” I’m still waiting. So are the shrimp. - Keep it simple.
You don’t need 42 mutual funds. You need a good balance of low-cost ETFs, maybe a few individual dividend stocks, and an understanding of what everything is for. - Work with someone you trust.
A good advisor is like a good plumber—rare, but life-changing. And they both deal with things that stink when ignored.
Final Thoughts
Getting older doesn’t mean you have to stop growing—just be smarter about how you grow. Your portfolio should be like your wardrobe: practical, comfortable, and not still trying to pull off leather pants from 1987.
Dynamic allocation isn’t some fancy Wall Street trick—it’s common sense. Adjust your investments the way you adjust your thermostat: based on your current comfort, not the weather in 1985.
So here’s to evolving portfolios, dependable income, and never, ever buying a stock just because it has a lowercase ‘e’ in front of it.