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Hello: Just found the forum and been listening to DR off and on for 5 years.

I have a question on his IRA mutual fund investment advice. I've often heard him say to invest in the following types of funds @ 25% each:

Growth & Income
Growth
Aggressive Growth
International

What I have never heard him explain is how to balance those funds based on one's age. For example, I think what he is recommending is OK for someone in the 40's. However, I believe this formula is too aggressive for someone who is 60 and not aggressive enough for someone who is age 20. What your understanding on the proper ratio based on one's age and time from retirement?

Has Dave ever explained this in more detail?
 

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This is all I have seen on it from his book or website.

"If your risk tolerance is low, which means you have a shorter time to keep your money invested, put less than 25% in aggressive growth or consider adding a “Balanced” fund to the four types of funds suggested."
 

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Not from Dave Ramsey, but a rule of thumb I have heard for stocks vs. bonds is to take 110 minus your age and that is the amount to keep in stocks.
 

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This isnt necessarily a good rule of thumb. At 30 yrs old, there is no way I would consider having 30% of my investments to be in bonds. I doubt I even have 10%.
It's an easier way to figure out what melodys posted. It's also what is recommended for people who want to get their retirement going, but aren't fully up to speed on what they should be doing. I am open to more risk myself, so I agree with you.

However, if you are going to state that it's not a good rule of thumb, please post what is a good rule of thumb for this topic.
 

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I really dont think there is one. It depends on each persons goals and risk tolerance.

I would point back to the OP and Dave's recommendation of 25% each of

Growth & Income
Growth
Aggressive Growth
International

Change the Aggressive Growth to a Balanced Fund if your risk tolerance isnt as high

ETA: the difference between the two "rule of thumbs" mentions is 10%. One subtracts your age from 100, the other subtracts age from 110.
 

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You would have to see what types of investments are actually in those categories. I haven't bothered looking at mutuals for a long time because I'm on baby step 2, but when I see "Growth and Income" that "income" part makes me think more set returns and less volitility. International is basically the same as aggressive because you have very little understanding of what might happen and how other countries are inter-related in terms of who affects who, like that one country that seized bank deposits a number of months ago. That'd never happen in the US. I would rank the risk from low to high: G&I, Growth, Agg Growth, and Int. The closer you are to retirement, the more stable you want your returns. When you're less than 5 years from retirement, you want to have a stable nest egg. It took about 3 and 5 years for the last two "crashes" and recoveries (2001 to 2004 and 2007 to 2012). You don't want to be pulling out distributions while your balance is dropping from market activity. When you're within 5 years, I would probably say 65% large-cap and less agressive funds (hoping for a 6% return or so on average) and leave the rest half and half in moderate and high risk. But your risk tolerance will probably be different than mine, because I'm 30 without a mortgage yet, only guessing how I'd feel in 30 years.
 
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