Stock market downturns are easier for young people to endure since they have plenty of time before they retire. However, people who are in their 60s and 70s don’t have as much time before they have to withdraw funds from their portfolios.

This topic recently came up in the Bogleheads subreddit. A 60-year-old individual posted in the community about being risk averse. The original poster allocates 65% of its capital into stocks and the remaining 35% into bond ETFs. The Redditor expressed confidence that they wouldn’t sell but wanted to hear from others. The post got plenty of traction, and some of the comments offer valuable insights for long-term investors.

Lessons from the Great Recession

One of the top comments came from a Redditor who had the same 65/35 portfolio allocation leading up to the Great Recession. The commenter was 57 when the Great Recession happened, and they didn’t bother to check their portfolio in 2008.

The commenter went on to explain that the portfolio went down less than the broader market and was back to its pre-recession level in 2010. However, the Redditor mentioned that they missed out on a lot of gains by having 35% of their portfolio allocated toward bonds.

While bonds minimize losses during economic downturns, you also leave a lot of money on the table during bull runs. That happened with the commenter, and this individual wished that he had a 100% stock portfolio at the time.

It’s hard to hold on to stocks when they are going down. However, the Great Recession provides a valuable lesson in patience. Many of the investors who continued to buy amid the turbulence have lofty gains today.

Don’t Expect Much from the Bonds

One Redditor replied to the top comment by saying that they had a similar experience during the Great Recession. However, this individual put everything into stocks and didn’t own any bonds. Naturally, the individual’s portfolio took a beating during the Great Recession, but it recovered in a big way once the economy got better.

The commenter retired in 2012 at 55 years old and has everything in stocks to this day. This was a great move based on the lengthy bull run market participants enjoyed. However, the commenter also mentioned that you shouldn’t expect much from bonds. Not only do bonds have low returns, but those returns are even lower when you consider inflation. Interest is taxed as ordinary income, further limiting the upside potential of bonds.

When Do You Plan to Retire?

The Redditor mentioned that he is risk averse. While the top commenters profited more by holding their stocks, personal finance is personal. Many comments seem to agree that the Redditor is doing fine, but others believe the Redditor should put more money into bonds.

A lot of it comes down to when you plan to retire and how much you have in your portfolio. If you’re still working, it may be beneficial to hold on to the stock positions. However, someone who is about to retire may want to gradually shift more of their money from equities into bonds.

The Redditor’s portfolio size is also important. If the Redditor has a $10 million portfolio, they don’t have to take many risks. However, a $2-$3 million portfolio, while still impressive, can still benefit from some stock gains. The Redditor also has to assess their monthly expenses and if their portfolio is in a good position to cover those costs.

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