Why Diversification Still Matters: The Case for a Balanced Portfolio at Every Life Stage

We’ve all heard it before: don’t put all your eggs in one basket. It’s a phrase that gets thrown around so often it can lose its meaning — especially in the world of personal finance, where it’s easy to get caught up chasing returns or reacting to headlines.

But at Optiml, we’ve seen the power of diversification firsthand. It’s not just about smoothing the ride — it’s about building a financial plan that can actually survive the long journey, no matter what happens along the way.

Let’s dig into why maintaining a healthy mix of equities, bonds, and fixed income (like GICs) can be one of the smartest decisions you make — and how your portfolio mix should evolve as you move through life.

The Core Idea: Balance Risk and Return

At its core, diversification is about spreading risk. Different assets perform well under different conditions:

• Equities (stocks) offer long-term growth but can be volatile.
• Bonds are generally more stable and provide consistent income.
• GICs and other fixed income offer guaranteed returns — but lower growth.

By combining these in the right proportions, you avoid being overly exposed to any single market condition. You might not hit every home run, but you dramatically reduce the chances of striking out.

And that’s the point. Retirement planning isn’t a sprint — it’s a 30+ year marathon. Consistency wins.

How Your Mix Should Change Over Time

There’s no one “perfect” portfolio, but here’s a common framework we see that works well:

In Your 30s and 40s: Growth First

• Equities: 80–90%
• Bonds / GICs: 10–20%

In your early earning years, time is your biggest advantage. You can afford to take on more risk because you have decades to recover from any downturns. Equities offer the best long-term growth — and with regular contributions, you can actually benefit from market volatility through dollar-cost averaging.

In Your 50s and Early 60s: Balance and Stability

• Equities: 60–70%
• Bonds / GICs: 30–40%

As retirement approaches, you’ll want to reduce volatility and start building a more predictable income stream. A shift toward bonds and GICs provides stability and protects the gains you’ve made.

In Retirement: Income and Preservation

• Equities: 40–50%
• Bonds / GICs: 50–60%

Once you’re drawing income from your portfolio, protecting against big losses becomes even more critical. However, you still need some growth — especially if you expect your plan to run 20+ years into retirement. A 50/50 mix is often the sweet spot.

Case Study: Two Portfolios, One Market Crash

Let’s look at a quick example. Two users, both age 65, enter retirement with a $1,000,000 portfolio and the same withdrawal needs. One has 80% in equities, the other a 50/50 mix of equities and fixed income.

In a simulated market scenario with a 30% drop in equities (think 2008 or 2020), the all-equity portfolio falls to $760,000, forcing larger withdrawals from a smaller base. The balanced portfolio only drops to $870,000, and recovers more quickly thanks to more stable income sources.

By year 10, the balanced portfolio is worth $50,000 more — despite having lower average returns — simply because it avoided deeper drawdowns and more volatile withdrawals.

You Can’t Predict the Future — But You Can Prepare for It

Here’s the reality: no one can say what the markets will do next year, next decade, or even next month.

But that doesn’t mean you should guess — or worse, ignore it.

That’s where tools like Optiml’s upcoming Scenario Tester come in. You’ll soon be able to simulate your financial plan across different rates of return, recessions, inflation changes, and even poor sequence of returns. Then, compare how different portfolio allocations perform under each.

Because a plan that only works when markets are perfect... isn’t really a plan.

Final Thoughts: Stress Test, Then Rest Easy

Your financial plan doesn’t need to be perfect. But it does need to be diversified and resilient.

By combining growth-focused investments with stable income assets like GICs and bonds, and adjusting your mix as your needs evolve, you give yourself the best chance at not just reaching retirement — but thriving in it.

And by testing your plan against a range of scenarios, you ensure your future isn’t left up to chance.

Log in to Optiml, review your current portfolio assumptions, and get ready for our new scenario testing features — launching soon.

The best time to build a resilient plan was yesterday. The second-best time is now.