/Invest in Stocks? Don’t Overdo It

Invest in Stocks? Don’t Overdo It

Americans are enamored with the stock market. More than half of all U.S. families (52 percent) own stocks in some way, whether it’s through a 401(k) retirement account or investments in a brokerage account. The rate of stock ownership is the highest since 2007—the early days of the Great Recession.

Stock ownership also cuts across all age demographics. According to Federal Reserve data, even Americans aged 75 and over are more likely to own stocks now than at any point since the 1980s.

There is one downside: Too much stock investing. Many Americans are holding too many of their assets as stock investments, especially baby boomers near retirement. If you’re near retirement age, experts suggest the 60-40 rule for portfolio diversification—invest 60 percent of assets in stocks and 40 percent in bonds and cash. However, the average baby boomer has 70 percent of assets tied up in stocks, which increases risk at the worst time.

As Jeanne Thompson, senior vice president at Fidelity Investments, put it: “We give them the same advice when the market is high as when it’s low. Make sure to check that you’re properly allocated and not taking too much risk. Make sure you’re able to sleep at night.”

When you’re young, you can afford to take on riskier investments that deliver higher returns in the long run. But baby boomers can’t afford to wait two or three decades to see their money grow.

Know where you stand in life, and invest accordingly.