Simple advice can create problems that are not always simple to fix. One example is the advice that an investor's age plays a central part of their investment strategy and asset allocation (for example standardised high risk strategies for young investors and conservative strategies because you are already, or close to being, retired). This advice is too generic and the individual's circumstances and appetite for risk must be taken into account. If you follow this type of generic advice you may find yourself having sleepless nights and worrying needlessly about either investments considered too risky or of running out of money.

Today's 65 Is Not Yesterday's 65

A lot of investment advice is predicated on what might be called a life-cycle theory of investing. This is an idea that people go through predictable stages of their financial lives, accumulating more assets than savings in the early years, saving more in the high-earning years of middle age, and then very little, if any, saving throughout retirement.

Things have changed, though. Long careers at a single employer are less common, people are tending to have children at an older age, be responsible for older dependents as well; and with people living longer than ever before, reaching 80 years is no longer unusual. However, much of the retirement advice presently published is predicated on old data. So with today's 65-year olds lifespan significantly higher than yesterday's 65-year old, even with superannuation guarantee legislation most Australian workers are significantly under-saving for what it is likely to be their lifespan.

Your Age Is Not Your Number

There are several published investment suggestions which can be considered dangerous, especially without seeking specialist investment advice for your particular circumstances. One such example often touted around the weekend BBQ is that a person's age should correlate to the percentage of their portfolio that should be invested in bonds or a similar conservative asset class. The suggestion being that a 30-year old should have a 30% allocation to bonds, whilst a 65-year old should be 65% allocated to bonds. Rather, this suggestion should perhaps be, in the extreme, where a newborn should have a zero allocation to bonds, and a centenarian a 100% allocation to bonds. Humans differ and individual circumstances differ, so seeking advice from a professional expert is important, nay critical.

Shares Are For The Long Term (and may not be as risky as you think)

People who are a little sceptical about shares should know that the risks accompanying equity investments may not be as great as they think. Whilst putting all of your money into a single share (or even similar group of shares in one industry) is risky, a diversified portfolio of shares covering varying industries, offers a different and less risky option.

Multi-year losses in the stock markets are rare, and that is a powerful advantage for investors. As long as an investor holds a diversified portfolio and invests for the long-term, the odds of losing money is actually quite low and the odds of achieving positive real returns are good.

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