Life isn't entirely predictable. A young investor starts investing in retirement accounts. A few year later, meets a nice person and marry. They decide to buy a house. To avoid Private Mortgage Insurance (PMI), they'd like to take a loan from their own retirement accounts, but unfortunately, their 100% stock portfolios are significantly down...abc132 wrote: ↑Sat May 11, 2019 12:46 pmSimilar performance with less volatility when the money is needed, and when the dollar amount changes per day are much bigger? I think you just proved my point. You can get more performance and less risk, or the same performance and less volatility by being more aggressive at a young age (your 100/0 to 20/80 example).longinvest wrote: ↑Sat May 11, 2019 11:50 am
Unfortunately, it's not that simple. Over long periods of time, a portfolio with a gliding allocation delivers similar returns to a portfolio with a fixed allocation at the average of the glide. An investor using a portfolio with a glide from 100/0 down to 20/80 stocks/bonds during his life is likely to experience similar cumulative returns to another investor using a 60/40 portfolio all lifelong, during both accumulation and retirement.
My suggestion is to start off more aggressive and glide to a portfolio the OP would be comfortable with in retirement.
Owning a single target date fund is a really good idea for someone who is risk averse, reducing the decisions down to zero.
It's easy to imagine scenarios where a balanced portfolio, all lifelong, can be advantageous, not because of fear, but simply for prudence.
Retirees need their portfolios to grow, too. They can limit the volatility of their total retirement income by combining variable portfolio withdrawals (VPW) with stable lifelong income like Social Security, pension (if any), and (if necessary) inflation-indexed Single-Premium Immediate Annuity (inflation-indexed SPIA).
Vanguard's experts seem to agree that there's more than one approach to investing, in life. They've built two distinct sets of all-in-one funds, the LifeStrategy and the Target Retirement funds. They let investors choose.
The OP was asking if it was OK for a young person to invest into a balanced portfolio. I provided the example of a sensible plan that would lead a young investor to make such a choice.