This past weekend I came across an investment situation that I see quite often. It relates to the portfolios of super seniors (80 plus years).

The situation is this: The senior has a regular income from a pension plan or some other means. They don't spend much money. As a result, they aren't tapping into their investment portfolio to pay the bills. In many instances, they are still building capital at their advanced age. When they die, it is their intention to pass on the money to their children.

Obviously, this is a terrific position to be in. The interesting thing about it, however, is that in most cases the seniors' portfolios are structured as if they are living off their investments. The situation I ran into this weekend was such a case. The couple, who were in their mid-80's, had a very healthy portfolio (well north of a million) and was still adding to it. And yet, the portfolio was structured very conservatively with over 80% in fixed income securities.

I have always contended that if seniors are intending to give the money to their children and they don't need it to live off of, then their portfolios' asset mix should reflect the kids' situation, not their own. What this means is that their portfolios should be more balanced. They should have a healthy allocation to equities instead of just holding fixed income securities that generate a higher income stream with less volatility. The equity tilt would depend on the age and situation of the children.

This approach has worked well in situations I've been involved in, but it isn't for everyone. Sometimes the super seniors, who are children of the depression, don't want to take any risk and subject their portfolios to short-term volatility. They want to be assured the money will be there for their children when they pass away.

But in a lot of cases, the investors and/or their advisors just haven't thought about who the money is being managed for. If parents really want the best for their children, their portfolios should reflect the children's needs.