I am going to be 57 years old and have a healthy IRA being currently managed. I am leaning toward moving to an index fund so to limit my risk. I have read information in the past that would indicate in my age bracket you should invest in a less risk portfolio. Trailing 1 year was 22.73% From inception Jan 2016 is 17.04% and current YTD is 3.84%

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    An index fund is not automatically less risky than any other type of fund. Depending on what your current manager is doing, the index fund might be riskier.
    – Ben Miller
    Feb 3, 2018 at 16:59
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    Traditionally, advisers used "100 minus your age" as a rule of thumb for allocation of equities. So at your age of 57, you would be at 43% equities and 57% fixed. With interest rates being so low and with Americans living longer, many have suggested that the new metric should be 110 or 120 minus your age, especially for those who can tolerate some additional risk. And FWIW, for the first time in 50 years, life expectancy has dropped slightly for the past two years. If that keeps up, we might be going back to the "100" rule ;->) Feb 3, 2018 at 20:10

3 Answers 3


I think you got mixed with terms.

An Index Fund follows an public index, compared to a Managed Fund, where a hopefully qualified and typically well-paid fund manager tries to beat the index by making knowledgable decisions about what shares to buy and sell.
Typically, an index fund comes with significantly less fees, and the current discussion in the market is that from experience, a managed fund will only very seldom beat a non-managed index fund. So with a managed fund, chances are you pay money for a manager that makes decisions that might turn out worse than simply following the index.

The risk class of the fund is another dimension, and completely independant to this decision:
Typically, funds are roughly classified into Growth, Value, and Income, going from high-risk/high-return towards low-risk/low-return. If you have enough time before you need the money, the better approach is towards Growth (small caps, international, developing & emerging markets, etc), as you are able to recover well from crashes over the years; if you must be able to access the money soon, you cannot afford wild changes, and need more security, so you need to have the money in Income (bonds, etc.); value being in the middle (large caps, europe/US) Your time horizon and your risk-adversity should define where you want to be on that scale.

If you are currently living from the investment, at least the needs for the next several years should be invested on the Income side. Independantly, you can have those investments in index value funds or in managed value funds, etc.


Risk of an index fund depends upon the index. Generally broader indexes are safer. For example a fund tracking all US large cap stocks will be much safer than a narrow index.

Having said that there are studies supporting the fact that index funds are better than active funds in long run. Moreover greats like Jack Bogle have strong positive views regarding index funds.

  • With an index fund, you are betting that "some where and some time someone will make money", which is less spectacular but more definite in the long run than trying to out guess the market.
    – pojo-guy
    Feb 4, 2018 at 13:46

I tend to disagree with the experts; they would typically put a "senior" in nearly all bonds. At your age you have a good chance of being around 30 years so some investments in long term growth is reasonable. On average stocks should have better returns than 100 % bonds. I am 80 and have 80% in stocks and stock ETF 's. I mostly have high divided conservative things like ATT. I have stayed out of the "FANGS " so my returns are not as high as some ,but better than all bonds.I suggest you keep evaluation your investments; you are more interested in them than anyone else. I think it is worth watching programs like "Fast Money" , etc.

  • to support the above comments, there is risk in bonds and there is certainly risk in leaving your money purely in a cash account earning 0.01% interest. In a word - "inflation". By doing nothing (supposedly risk free), you still risk your retirement savings. That is why diversification is important. As others have said, a broad index fund is diversified because all sectors will not go up or down in a correlated fashion. You will benefit from stocks that go up and have only limited downside when the market turns downward.
    – rocketman
    Feb 4, 2018 at 4:40
  • I think a key point is how much of that nest egg is the "senior" going to use. In some cases, they are investing money that will almost certainly go to children, maybe even grandchildren, whose time horizon is much longer. Feb 6, 2018 at 0:21

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