All in on stocks? Young investors should beware of the risks, experts say

With Bay and Wall streets hovering near all-time highs recently, young investors might be inclined to load up on stocks and forgo more stable fixed-income investments, without realizing how much risk they’re truly taking on.

Portfolios have traditionally been constructed with a 60 per cent weighting to equities and 40 per cent to fixed income. Chris Merrick, founder-owner of Merrick Financial said that is still a good split for newer investors because the fixed income portion will lower the portfolio’s volatility. 

However, young investors who are bit more knowledgeable about the market and have a higher risk tolerance can sometimes bump that split to 80 per cent stocks, 20 per cent fixed income, he said. 

“The general rule of thumb is the younger you are, the more risk you can take with a higher percentage of equities versus fixed income,” said Merrick.

“However, personal finance is more personal than it is finance in that finance is psychology, not science.” 

He generally does not recommend a portfolio consisting entirely of stocks. 

While individuals with more time in the market can absorb greater risk and market fluctuations, other factors are also at play.

Merrick said there are three key considerations when it comes to risk: a person’s ability to withstand losses, the level of risk needed for growth and a person’s emotional capacity for market fluctuations. 

He said sometimes people are 100 per cent invested in stocks, but then sell during market downturns. The best plan is to “have one that you stick with as opposed to more equities.” 

Sandi Martin, a certified financial planner at Sandi Martin Financial Planning, said a person’s capacity for risk is different from their psychological ability to take risks. She noted risk capacity depends largely on whether that person can control when they take the money out of their investment portfolio. 

“If you can, and if that’s 30 or 40 years from now, then there is no reason not to invest in a really high-growth long-term portfolio.” 

An 80 per cent weighting to stocks wouldn’t be abnormal for an investor with a 40-year horizon, Martin said. She doesn’t recommend a 100 per cent stock weighting.

“I have seen people in 100 per cent equities, I do tend to get a little bit antsy about that. I do think there is reason to have a little bit of a more conservative or cash-based slice in a portfolio,” she said. 

Martin added there can sometimes be an information gap, where investors are more knowledgeable about equities than bonds. 

Fixed income acts differently from stocks and is needed for a well-diversified portfolio, she said. It can also provide predictable income investors can use to rebalance their portfolio between asset classes. 

The best way to get fixed income exposure depends on how much money a person has to invest, said Martin.

She said fixed-income mutual funds or ETFs are great for people with less money to invest, provided they keep fund management fees low. In contrast, she said buying individual bonds can be better for people with more money to invest.

Overall, Martin said good fixed income investing requires a variety of maturity dates and different types of bonds — government and corporate, both domestic and foreign.

Another way to get broad portfolio diversification is through an asset allocation ETF, Merrick said, adding that these products can help solve balancing issues, as they offer “preset amounts of equities to fixed income.” 

Asset allocation ETFs can offer various splits between bonds and stocks and are often globally diversified, Merrick said. 

“It basically buys the index, which has been shown to be superior over long periods of time as opposed to individual stock picking,” he said.   

Merrick said buying and selling individual securities is “exceptionally difficult” for investors trying to beat the market, noting that even many professional investors are unable to do so.

As investors with longer horizons look to build wealth for their retirement, Martin said they may have more time in the market than they realize. 

“A lot of people think about investing as the thing they do between now and retirement, and then investing stops and that is not true,” she said. 

“Somebody who’s in their early thirties might have 60 years of a time horizon because they’re not withdrawing everything all at once. They’re definitely hoping to have a portfolio to manage many years into retirement.” 

This report by The Canadian Press was first published Nov. 18, 2025.