One rule of thumb calls for investors to have the percentage of their portfolio in bonds that represents their age. So a 60-year-old would hold a 60 percent position in fixed income.
With life spans increasing and the very real possibility of being retired for 30 years or more, some investment advisers are recommending more aggressive allocations later in life.
"I have some retirees that still have 60 percent equity positions," says Kevin Brosious, certified public accountant, CFP and president of Wealth Management in Allentown, Pa. "As long as they have the liquidity to pull funds out when they want to, that's fine."
"It's really the lack of liquidity that will kill a plan or not allow a person to realize their goal," he says.
With enough liquidity, long-term investors can ride out market volatility and wait out the recovery.
For an investor who can't afford to take much risk due to time constraints or emotional disposition, a portfolio heavy on the fixed-income side and light on equities can offer some growth with some safety.
The conservative asset allocation model includes equities for growth, REITs and TIPS for inflation protection, and bonds as stabilizers.