For Richest Gains, Avoid Biggest Losses

NEW YORK (TheStreet) -- If you're 60 years old and about to retire, what percentage of assets should you keep in fixed income?

That's hard to answer, and a debate is raging about the best approach. On one side are aggressive advisers who argue that most older investors should emphasize equities. Conservative experts counter that it pays to keep most investments in fixed income.

Among the equity proponents are some companies that run target-date funds. These are designed for investors who expect to retire on a certain date, such as 2010 or 2020. As the retirement date approaches, the funds automatically shift to heavier weightings in fixed income.

While each company has a different allocation, many target funds maintain heavy stock positions. Alliance Bernstein 2010 Retirement(LTDAX Quote) has 66% of assets in equities and the rest in fixed income. Oppenheimer Transition 2010(OTTNX Quote) holds 67% in stocks. The fund companies have argued that because investors may live 20 or 30 years after retiring, they need the capital gains that only stocks can produce.

Conservative advisers contend that investors with big equity stakes can be wiped out in a stock market downturn. Older people who suffered big setbacks last year may never recover. A notable voice of caution is John Bogle, founder of Vanguard Group, who suggests using a traditional rule of thumb. Your allocation to bonds should about equal your age, he says. So a 60-year-old would have 60% of assets in bonds, and a 40-year-old would keep 40% in fixed income.