# Lifecycle Investing

Source: https://www.yieldcurve.pro/learn/lifecycle-investing

**Lifecycle investing** is a portfolio framework that determines how an investor's asset allocation should evolve from early career through retirement. The central insight is that [human capital](https://www.yieldcurve.pro/learn/human-capital) — the present value of future labor income — is a large, bond-like asset that declines with age, and the financial portfolio should adjust accordingly.

The lifecycle glide path:

- **Young investors** (20s-30s): human capital is large and bond-like, so the financial portfolio should be equity-heavy (80-100% stocks). The total portfolio (human + financial) is already diversified.
- **Mid-career** (40s-50s): human capital is shrinking. The financial portfolio gradually adds bonds to maintain a stable overall risk profile.
- **Near retirement** (60s): human capital is nearly depleted. The financial portfolio shifts toward bonds and short-duration assets to reduce sequence-of-returns risk.

This framework provides the theoretical foundation for target-date funds, which automatically reduce equity exposure as the target retirement year approaches. The typical target-date glide path moves from ~90% equities at age 25 to ~40% equities at age 65.

Lifecycle investing differs from the static [60/40 portfolio](https://www.yieldcurve.pro/learn/60-40-portfolio) by recognizing that a fixed allocation ignores the investor's most important asset. A 30-year-old in a 60/40 portfolio is actually underweight equities relative to their total wealth, while a 65-year-old in the same portfolio may be overweight.

The framework assumes that [risk aversion](https://www.yieldcurve.pro/learn/risk-aversion) and the [equity premium](https://www.yieldcurve.pro/learn/equity-premium) are relatively stable — if these change significantly, the optimal glide path shifts. The [portfolio lifecycle calculator](https://www.yieldcurve.pro/portfolio) applies this framework to generate personalized allocation recommendations.