Are Older Investors Overinvested in the Stock Market?

Americans are holding record levels of stocks in their 401(k)s.

Vanguard reports that investors in their late 30s had about 88% of their retirement accounts in stocks last year, compared with 82% a decade ago. Even those approaching retirement have inched higher—workers in their early 60s average 60% in stocks, up from 57% ten years prior.

Some in the financial media have flagged this rising equity allocation as worrisome for older savers, suggesting that they may be taking on more risk than is prudent. The common worry is that retirement accounts heavily skewed toward equities leave workers vulnerable to sharper downturns, especially compared with the traditional “60/40” stock-bond mix. For those approaching retirement, the critique seems even more pointed: shouldn’t these folks be paring risk, not increasing it?¹

Not in our view. The above interpretation assumes more stocks automatically equals more risk, but that is not necessarily always true. The missing piece here is the time horizon.

For younger workers in their 20s, 30s, and even 40s, retirement that could still be decades away. Higher equity allocations are often warranted. But even a 55- or 60-year-old might reasonably expect their retirement savings to last another 20 to 30 years, if not longer. In some cases, investors are not just saving for themselves, but also planning to leave assets to heirs, extending the investment horizon even further.

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Positioning Your Investments for a Volatile Market

“Don’t put all your eggs in one basket.” It’s a classic proverb, and for good reasons. Diversifying your portfolio is one the most basic pieces of investing advice—but unfortunately, it’s also advice that too many investors ignore.

Zacks Advantage would like to help you ensure that your investments are properly diversified so that you can avoid the risks of over-concentration in any particular asset class. That’s why we’re offering our free guide, Is Your Investment Portfolio Actually Well-Diversified? ²

Act now to get the basics of diversification, including:

• Why the average investor’s returns lag behind almost every investment category
• 4 myths of a diversified portfolio
• How to create a truly well-diversified portfolio

Learn more with our free guide, Is Your Investment Portfolio Actually Well-Diversified? ²

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When viewed through this lens, we would argue that the short-term volatility associated with stocks is less of a risk than outliving one’s savings. Equities, while more volatile in the near term, have historically provided far superior long-term returns compared with bonds or cash. A higher allocation to stocks, even later in life, may therefore make sense if the goal is to generate enough growth to sustain a multi-decade retirement.

On the other hand, overly conservative allocations can actually increase the risk of shortfall. For example, a worker who retires at 65 but lives into their 90s would need 25+ years of retirement income. A portfolio with a low allocation to stocks may not generate enough growth to support spending needs over a long stretch of time.

Part of the reason today’s investors are comfortable with more equities may also be historical experience. Since the creation of the 401(k) in the late 1970s, equities have outperformed bonds across most multi-year periods. Even when stocks have endured steep declines, as in 2008 or early 2020, markets have historically recovered. That doesn’t guarantee the future will look the same, but it has shaped investor psychology, particularly for younger workers who have only known quick rebounds from downturns.

Critics sometimes argue this confidence is misplaced, citing government or central bank interventions during past crises as the reason for fast recoveries. But history suggests markets are resilient in their own right, driven by innovation, earnings growth, and the forward-looking nature of investors. Betting against that long-term resilience has generally not paid off.

Bottom Line for Investors

Higher stock allocations in retirement accounts aren’t automatically a warning sign. For many savers, they may actually reflect a rational response to the realities of longer lifespans and the need for portfolios to sustain decades of withdrawals. Equities remain the engine of long-term growth, and owning more of them can help reduce the risk of outliving one’s savings, in our view.

That said, allocations should always reflect personal circumstances. A blanket prescription for everyone to hold 90% in stocks is not appropriate, but neither is assuming a 60/40 portfolio is always best. Investors should instead focus on whether their mix of assets matches their goals, needs, and time horizon.

This is where a thoughtful, research-driven approach can help. At Zacks Advantage, we build ETF portfolios designed to align with investors’ individual risk profiles and long-term objectives. Our process emphasizes diversification across asset classes, active risk management, and cost efficiency, all while being guided by our proprietary forecasting model and ETF ranking system. The result is a portfolio that adapts to changing market conditions, while keeping your long-term retirement plan on track.

Most investors can get where they need to go over the long term by owning a diversified portfolio of stocks and/or ETFs. In fact, “diversify your portfolio” is one the most basic pieces of investing advice. Sadly, in our experience many investors still put all (or most) of their eggs in one basket.

At Zacks Advantage, we strive to help every investor properly allocate their assets. In fact, we’ve put together a helpful guide to help you understand the basics of portfolio diversification, including:

• Why the average investor’s returns lag behind almost every investment category
• 4 myths of a diversified portfolio
• How to create a truly well-diversified portfolio

Get our free guide, Is Your Investment Portfolio Actually Well-Diversified? ³, to learn how to create a truly diversified portfolio.

Download our FREE Guide³

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¹ MSN. 2025.

² Zacks Investment Management may amend or rescind the Is Your Investment Portfolio Actually Well-Diversified? guide offer for any reason and at Zacks Investment Management’s discretion.

³ Zacks Investment Management may amend or rescind the Is Your Investment Portfolio Actually Well-Diversified? guide offer for any reason and at Zacks Investment Management’s discretion.

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