Quick, subtract your age from 100...

Your answer is the percentage of your portfolio you should have in stocks. At least, that's according to the "traditional" rule of thumb.

So since I am 61 years old, I should be 39% invested in stocks.

If you're 35, then you should have 65% of your assets in stocks. If you're 70, you'd want 30% in stocks. And it's generally assumed that the rest of your assets would be in bonds.

The basic idea behind this rule of thumb is simple... You save and invest for years so you have money when you get older and can't work (or just don't want to).

When you're younger, you can afford to wait out all the crashes and bear markets. And you can even invest more during those turbulent times so your nest egg will grow even bigger.

As you get older, though, your focus shifts from growing your wealth to preserving it. With less time to make up potential losses, you want to hang on to what you've built... So over time, you gradually allocate more of your money to bonds and cash.

Now, I'm not saying you should or shouldn't follow this rule of thumb. But the basic idea of reducing your risk profile as you age isn't the worst idea I've ever heard.

However, it seems like many older Americans are now doing the opposite. And it shows the mega-bubble of the past decade-plus is still misleading investors – in very dangerous ways...

A Wall Street Journal article on this came out last month. It was titled "America's Retirees Are Investing More Like 30-Year-Olds." And as you might expect, it suggests that retirees have abandoned the rule of thumb to chase bigger returns...

Nearly half of Vanguard 401(k) investors actively managing their money and over age 55 held more than 70% of their portfolios in stocks. In 2011, 38% did so. At Fidelity Investments, nearly four in 10 investors ages 65 to 69 hold about two-thirds or more of their portfolios in stocks.

And it isn't just baby boomers. In taxable brokerage accounts at Vanguard, one-fifth of investors 85 or older have nearly all their money in stocks, up from 16% in 2012. The same is true of almost a quarter of those ages 75 to 84.

Why take more risk at an age when capital preservation should be your priority?

The Journal article cited several possible causes for the trend. For example, it mentioned the birth of 401(k) accounts in 1978 and the historical tendency over the past century for stocks to return more on average than bonds.

But you and I both know that those aren't the real causes...

The real cause is simply that savers haven't had a place to hide cash since 2008. That's when the Federal Reserve first took interest rates to zero.

Since then, retirees have become increasingly comfortable with taking more risk to earn more return. In other words, they've learned to put more of their savings into riskier assets like stocks instead of safer assets like bonds and cash.

And of course, it's not just older Americans. It's everybody, no matter how young or old.

It's impossible to overstate how pervasively zero-percent rates have distorted the mindsets of nearly everybody who has even a passing interest in stocks and bonds...

It would normally make sense to have this mentality after a down year like 2022. But with equity valuations still in mega-bubble territory, it's not a great idea today. And it shows us how difficult it has been to escape the biggest financial mega-bubble in all recorded history.

Taking on more risk in search of more return is the definitive mentality of investors in a bubble. The line between investing and speculation becomes blurrier and blurrier... And then, one day, it fades completely out of existence.

As I said in our January 20 issue of the Stansberry Digest...

Investing in a mega-bubble is tough...

It's like trying to paint an accurate full-length portrait of a human by looking only at their image in a fun-house mirror.

You can try to adjust for the distortions all you want. But the image you create won't look right in the end. You'll be misrepresenting reality, not accurately reflecting it.

You just can't know how tall, short, fat, or thin your subject really is until you see them in person – or at least in a picture that's not distorted.

In the end, it's essentially impossible to paint using a fun-house mirror. And in the market's fun-house mirror, garbage assets look like good bets and safe assets look stupid...

After all, why would you ever put your money in a savings account yielding 0.05% when you can buy stocks that go up and could double, triple, or quadruple your money in a matter of months?

It would be reasonable to assume that folks would've stopped reaching for returns and piling on risk after the drubbing investors took in 2022. But it's still happening today.

That means the danger isn't over yet. Ultimately, I expect all kinds of financial and economic distortions that we can't see today will come to light over the next decade. That's the hallmark of a massive mega-bubble.

Good investing,

Dan Ferris

Editor's note: You don't need to take on extra risk to double your money or better in this market. Dan is responsible for THREE of our firm's biggest closed winners... And he's currently sitting on triple-digit open gains as high as 880%. Now, he's pulling back the curtain to reveal the strategy he has used hundreds of times – in bull markets, bear markets, and even "dead zone" markets – to stay in wealth-building mode... without jeopardizing your entire portfolio. Get the details here.