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This can lead to the question: How do we tend to invest at different ages?

Of course, a higher percentage of Australians hold much of their investment savings in the default diversified portfolios of the big super funds – often with extra savings invested outside super.

And the way that investments held outside the big super funds' default portfolios are allocated in different asset classes provides a useful insight into personal investment preferences by age.

Independent consultants Rice Warner includes a look at investor preferences by age and wealth in its Personal Investments Market Projections 2016 report.

This report broadly defines the personal non-super investments market to include all investment assets held by investors in their own names or through trusts and companies. It does not include family homes and personal effects.

Rice Warner' discussion of asset allocation of personal non-super assets by age begins with investors aged 15-24. Parents and grandparents often have made investments on their behalf; and this appears to show up in their asset allocations.

Half of the personal investment assets of investors aged 15-24 are in cash and term deposits – second only to investors aged over 75 – and 27 per cent is allocated to life products, investment platforms and managed funds.

Interestingly, 22 per cent of the personal, non-super assets of these investors under 24 are in direct property. Young people generally would not have the money to invest in property by themselves; this percentage suggests plenty of parental help. And they have almost no investments in direct equities.

A point worth noting is that the personal, non-super investment patterns of these young investors seem to setup a broad path for their investing at older ages– yet with some key variations in asset allocations with age.

Consider these for asset allocations of personal, non-super investments at different ages shown in the Rice Warner report:

• Cash and term deposits: aged 15-24 (50 per cent of their assets), aged 25-34 (46 per cent), aged 35-44 (37 per cent), aged 45-54 (38 per cent), aged 55-64 (43 per cent), aged 65-74 (46 per cent) and aged 75-plus (52 per cent).
• Direct investment property: aged 15-24 (22 per cent of their assets), aged 25-34 (47 per cent), aged 35-44 (50 per cent), aged 45-54 (47 per cent), aged 55-64 (43 per cent), aged 65-74 (38 per cent) and aged 75-plus (17 per cent).
• Life products, investment platforms and managed funds: aged 15-24 (27 per cent of their assets), aged 25-34 (3 per cent), aged 35-44 (7 per cent), aged 45-54 (7 per cent), aged 55-64 (6 per cent), aged 65-74 (7 per cent) and aged 75-plus (14 per cent).
• Equities: aged 15-24 (1 per cent of their assets), aged 25-34 (5 per cent), aged 35-44 (6 per cent), aged 45-54 (9 per cent), aged 55-64 (8 per cent), aged 65-74 (9 per cent) and aged 75-plus (16 per cent).

Keep in mind that some investors may decide to have well-diversified portfolios for their savings in large super funds and self-managed super funds while taking a different approach for their personal, non-super holdings.

For instance, many investors choose to hold direct property in their own names and perhaps with some cash, fixed-interest, selected direct shares and managed funds.

The appropriate course for the asset allocation of personal, non-super investments will depending much on personal circumstances, including professional advice received.

It can be a pitfall for an investor to look at their personal, non-super portfolio or their super portfolio in isolation when considering the appropriateness of their asset allocations. Consider taking professional advice on this point if you haven't already.

Some investment habits – good and bad – tend to be set at a young age. It is vital to get on the right path at the beginning of your investing life.

Robin Bowerman,
Head of Market Strategy and Communications at Vanguard.
09 August 2017
www.vanguard.com.au