Your investment portfolio should evolve as you age. The appropriate asset allocation for a 25-year-old with 40 years of investing ahead is very different from what suits a 65-year-old approaching retirement. This guide outlines how portfolios typically shift through each life stage.
The Core Principle: Time Horizon Drives Risk Capacity
The younger you are, the more time you have to recover from market downturns — allowing a higher allocation to growth assets (shares, property). As you age, your time horizon shortens and your reliance on portfolio income typically grows, shifting the balance toward defensive assets.
However, age is a guide — not a rule. A 70-year-old with a pension, large savings, and moderate spending may hold more growth assets than a 55-year-old who plans to retire at 58 with no other income.
In Your 20s — Maximum Growth Phase
Life situation: Typically low wealth, high human capital (future earnings). Long time horizon (40+ years). Building the investment habit.
Appropriate portfolio: High growth — 85–100% growth assets
- Mostly Australian and international shares ETFs (VAS, VGS)
- Minimal bonds unless very conservative temperament
- Super: Switch to a High Growth or Growth option if still on the default Balanced
Key priorities:
- Maximise savings rate — contribution amount matters more than investment choice at this stage
- Build the investing habit (automate monthly contributions)
- Get all available employer super (don’t miss SG contributions)
- Start small; the act of investing is more important than the size
Example portfolio (25-year-old, $20,000):
- 50% VGS (international shares)
- 45% VAS (Australian shares)
- 5% VAF or cash buffer
In Your 30s — Growth and Building Wealth
Life situation: Rising income, often major life events (marriage, children, mortgage). Time horizon still long (30+ years to retirement). Growing portfolio.
Appropriate portfolio: Growth — 80–90% growth assets
- Core: VAS + VGS
- Consider adding REITs (VAP) for diversification
- Super: Growth or High Growth option still appropriate
Key priorities:
- Salary sacrifice into super (reduces taxable income; grows super efficiently)
- Review insurance needs (life, income protection — especially with dependants)
- Balance mortgage vs investing (both are valid long-term wealth builders)
- Increase contributions as income grows
Example portfolio (35-year-old, $150,000):
- 40% VGS
- 35% VAS
- 15% VAP (REITs)
- 10% VAF (bonds — modest defensive allocation)
In Your 40s — Growth Continues; Risk Awareness Grows
Life situation: Peak earning years. Children growing. Mortgage often under control. 20–25 years to retirement. Wealth is meaningful — losses are more significant in dollar terms.
Appropriate portfolio: Growth — 70–80% growth assets
- Begin introducing a more meaningful defensive allocation (10–25% bonds/cash)
- Super: Growth option; consider personalising investment option choices
- Income-generating assets (VHY, VAP) become more relevant as retirement income planning begins
Key priorities:
- Maximise concessional super contributions ($30,000/year cap FY2025–26)
- Consider catch-up concessional contributions (if super balance < $500,000)
- Review financial goals — when do you want to retire? How much do you need?
- Consider financial advice as wealth complexity grows
Example portfolio (45-year-old, $500,000):
- 35% VGS
- 30% VAS
- 15% VAF (bonds growing)
- 10% VAP (REITs)
- 10% cash/term deposits
In Your 50s — Approaching Retirement; Protecting Wealth
Life situation: Mortgage often paid or close. Children independent. Super growing strongly. Retirement within 10–15 years. Capital preservation becomes more important.
Appropriate portfolio: Balanced to Growth — 55–70% growth assets
- Shift bonds/defensive to 30–45% as retirement approaches
- Begin thinking about income strategy for retirement
- Super: Consider Balanced or Growth (not High Growth) as a baseline
Key priorities:
- Large concessional contributions to super (use catch-up provisions if applicable)
- Model retirement income scenarios — how long will your money last?
- Consider transition to retirement (TTR) income streams from 60
- Ensure investment properties, businesses, and other assets are included in planning
Example portfolio (55-year-old, $1,000,000):
- 30% VGS
- 30% VAS (income-oriented)
- 20% VAF (bonds)
- 10% VAP (REITs)
- 10% cash/term deposits
In Your 60s and Beyond — Retirement Income Phase
Life situation: Retired or approaching retirement. Portfolio must sustain 20–30+ years of income. Age Pension may supplement from 67.
Appropriate portfolio: Balanced — 40–60% growth assets
- Enough growth to last 25–30 years of retirement
- Enough defensive assets for 12–24 months of cash buffer
- Super: Move to pension phase; select income-appropriate investment option
Key priorities:
- Move super to pension (account-based pension) — 0% tax on earnings
- Establish cash buffer (12–24 months living expenses outside shares)
- Set up dividend/distribution income flow (cancel DRP; receive cash)
- Review Age Pension eligibility and optimise assets test position
Example portfolio (65-year-old, $1,200,000):
- 25% VGS (growth/inflation protection)
- 30% VAS (franked income)
- 20% VAF (bonds)
- 10% VAP (REITs)
- 15% cash/term deposits (income buffer)
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Frequently Asked Questions
How should a 40-year-old invest in Australia? A 40-year-old with 20–25 years to retirement typically suits a growth allocation of 70–80% in shares (Australian and international), with 20–30% in defensive assets (bonds, term deposits). Super should be on a Growth option. Key priorities are maximising super contributions and building outside-super investments. General information only.
When should I switch from growth to balanced in super? A common guideline is to begin transitioning from High Growth to Balanced/Growth options 10–15 years before planned retirement. A 60-year-old planning to retire at 67 has 7 years — a Balanced option may be appropriate. However, given that super income must sustain 25+ years of retirement, maintaining some growth allocation even in retirement is commonly advisable.
Should I have bonds in my 30s? A small defensive allocation (5–10%) can be useful as a rebalancing tool — when shares fall, you buy more shares with bond proceeds. However, a 30-year-old with 30 years to retirement may reasonably choose no bonds (pure growth), accepting higher volatility in exchange for maximum long-term compounding.
This article provides general financial information only. For advice tailored to your specific life stage and situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.