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Overcoming Bias Commenter's avatar

All I am saying is that you should trying to keep the amount of risk you run invariant through your life. If you manage your risk only in relation of your saving, you will inevitably over-expose yourself to the periods of time went your saving are at a maximum.You really have 2 forms of wealth: your explicit wealth and your ability to earn income in the future. If you invest based only on the first you'll run too much risk when you are in your fifties most likely...Imagine you live 100 years: work from 20 to 60 and retire from 60 to 100. You always earn the same wage and save the same percentage. At 60 your saving will likely reach their maximum. Even at 20% equity, you'd be running more risk than on year 1 on 100% equity (since you'd have 40 x 20% = 8 time more equity investment).

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Overcoming Bias Commenter's avatar

> The diversification you get from investing mostly in equities when young is due to the fact that you tend to have less money when young.

I don't think this is correct.  If you have Y dollars when you're young and X dollars when you're old, then you could always invest the Y dollars as if you were old (i.e. bond-heavy) and X-Y of the X dollars as if you were young (i.e. equity-heavy).

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