Over time spans of 20 years or more, the ups and downs of global stock markets always favor the ups. Average equity returns eventually leave bond and cash returns in the dust. As you age, equity strategies remain an important part of wealth building. But wealth preservation becomes increasingly important as you near retirement. The more dependents you have, the more you'll need to spend, and therefore the more cautious you need to be with your investments.
Many people tend to overestimate their tolerance for market volatility.
If the answer to any of these questions is yes, you may want to set your risk tolerance no higher than medium. We're not talking about the outlook for the next several months. Rather, we want your opinion of where we are in the broader business cycle. If you think the current economic expansion will continue, that argues for a bigger portion of stocks. If you believe we are in the later stages of an economic cycle, bonds make more sense, because as the economy slows, interest rates usually fall, boosting bond prices.