Asset Allocation by Age
- •Younger = more in risky assets (stocks); older = more in safe assets
- •Start with a rule of thumb like “100 − age = % in stocks”
- •Fit it to your situation, risk tolerance, and timeline—not a fixed answer
📋 Contents
Start with a rule of thumb
Allocation is how you split risky assets (like stocks) and safe assets (cash, bonds). A common rule is “100 − your age = % in stocks.” At 30, that's 70% stocks, 30% safe. Treat it as a starting point, not a law.
Why more safety with age?
It comes down to time to recover. When you're young, you can wait out a downturn, so you can take more risk. Near retirement, the money is needed soon—there's less time to ride out a big drop—so you hold more safe assets.
Example splits by age
| Age | Risky (stocks) | Safe |
|---|---|---|
| 20s–30s | 70–80% | 20–30% |
| 40s | 60% | 40% |
| 50s | 40–50% | 50–60% |
Common myths
- “The age rule is the answer” → It's a starting point; adjust for income, temperament, and goals.
- “Safe assets just lose” → They cushion downturns and help you hold on. Losing less is a kind of return.
- “Set it once and forget” → Ratios drift over time; occasionally rebalance back to target.
Frequently Asked Questions
What counts as a safe asset?
Deposits, government or high-grade bonds, and short-term cash-like assets. Things with small price swings that are easy to access when needed.
Isn't “100 − age” too simple?
Yes—that's the point, a starting gut-check. With longer lifespans, some use “110” or “120 − age.” Adjust to your situation.
Invest even with debt?
With high-rate debt, clearing it first usually wins. Think about allocation after you've handled an emergency fund and urgent debt.
How often should I rebalance?
Once or twice a year is enough, or whenever you drift far from target (say 5–10 points). Tinkering too often just adds cost and taxes.
What if I'm risk-averse?
It's fine to hold more safe assets than the age rule suggests. An allocation that keeps you up at night won't last. The best mix is the one you can actually stick with.