What is the best asset allocation for my age?

The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age . So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.

What is the recommended asset allocation model?

Income, Balanced and Growth Asset Allocation Models Income Portfolio: 70% to 100% in bonds. Balanced Portfolio: 40% to 60% in stocks. Growth Portfolio: 70% to 100% in stocks. Jun 12, 2023

What is healthy investment allocation is for a 25 year old person?

The #1 Rule For Asset Allocation As an example, if you're age 25, this rule suggests you should invest 75% of your money in stocks .

Should a 70 year old be in the stock market?

If you're 70, you'd look at sticking to 40% stocks . Of course, there's wiggle room with this formula, and it's really just a way to get started. And for many older investors, a 50-50 split of stocks and bonds is what's preferred throughout retirement, and that's fine, too.

What is a good portfolio for a 70 year old?

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative ( 40% stock, 50% bonds, 10% cash/cash investments ); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

What is the 110 age rule?

Age-Based Asset Allocation For example, there's the rule of 110. This rule says to subtract your age from 110, then use that number as a guideline for investing in stocks . So if you're 30 years old you'd invest 80% of your portfolio in stocks (110 – 30 = 80).

What is the most successful asset allocation?

There is no single ``best'' asset allocation, as this is going to depend on the investor's personal goal(s), time horizon, and risk tolerance. 60% stocks and 40% bonds -- written as 60/40 -- is considered a good balance of risk and expected return.

What is a good amount to have invested by age?

By age 35, aim to save one to one-and-a-half times your current salary for retirement . By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.

Is 70 30 a good asset allocation?

The 30% exposure to bonds buffers the risk of 70% equity exposure to some extent, besides providing stable returns. While asset allocation is generally governed by various factors including demographics and economics, the 70/30 rule may serve as a good starting point for most investors .

How much should a 72 year old retire with?

How Much Should a 70-Year-Old Have in Savings? Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.

How much assets should you have by age?

By age 35, aim to save one to one-and-a-half times your current salary for retirement . By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary.

What should my asset allocation be at 30?

For example, if you're 30, you should keep 70% of your portfolio in stocks .

What is the 4% rule for asset allocation?

The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.

What is the Right Asset Allocation Model for my Age? (2024)

Asset allocation models usually refer to the mix of three asset classes in your investment portfolio: stocks, bonds and cash – although cash is sometimes unwisely lumped in with bonds.

The three major issues in picking an asset allocation model are:

Goal – What is your investing goal? As the saying goes, if you don’t know where you’re going, you won’t know when you get there.
Time – How many years will you be investing to meet that goal? Less time means higher risk investments by necessity.
Risk Tolerance – Can you tolerate higher risk for the promise of higher returns, especially as you near retirement age? Stocks are generally higher risk than bonds or cash, but provide a higher return.

Asset allocation models based on age generally make a few assumptions, which are right for many people but not for all.

Risk Vs. Age Assumption

Younger investors should take more risks because they have more time to recover if they lose money, and conversely, older investors should take fewer risks. While generally true, this assumption ignores risk tolerance and investing acumen. Younger investors may take unwise risks, or be too nervous about short-term losses. Older investors may be savvy enough to profit in a bear market. Give your risk tolerance the proper consideration, and if you cannot handle the risk, scale back your goal appropriately. Don’t worry so much about saving for retirement that you die from stress and miss it entirely!

Starting Date Assumption

Many models assume you have started investing early in life. Experience says otherwise in many cases. Starting late distorts any age-based asset allocation model toward higher risk and stocks. Again, this may cause you to reassess and scale back your goals if they are not realistic.

Popular Asset Allocation Models by Age

With this in mind, let’s look at several age-based models.

Age In Bonds

You simply invest your age in bonds or conservative cash equivalents. At age 20, you have 20% bonds and 80% stocks, with the reverse at age 80. Variations of this model shift the line by subtracting your age from 90, 110 or some other number, then investing that percentage in stocks.

Target Date

This takes into account how quickly you need to meet your goal, holding a higher percentage of stocks for a longer time. A typical target date model might have you holding 90% stocks through your 30’s, ramping down more rapidly to meet with the age-in-bonds line around age 70-80.

“Flight Plan”

Proposed in a Forbes article in January 2013, this model suggests an early ramp-up as you gain expertise, a “cruising” level throughout most of the prime working years, and a ramp down toward retirement – simulating the takeoff, flight, and landing of an airplane. Where you set the starting levels, “cruising” altitude and time, and rate to ramp up and down, depends on the risk tolerance and needs to meet your goal.

Additional Asset Allocation Models

There are many other models online. Any place that you can invest will likely have their asset allocation suggestions on their website, either by age or by level of aggressiveness/risk.

For alternate investments such as real estate (higher risk) and precious metals and cash-value life insurance (lower risk), lump them in with the appropriate risk category.

The American Association of Individual Investors (AAII) website shows typical allocation models by aggressiveness as well as age, and breaks the model down further into stock categories (large-cap, small-cap, international, etc.) and short and long-term bonds. It also shows past performances. This is a great place for the uninitiated to start, although the AAII’s overall view is aggressive (conservative investors should hold 50% stocks in their opinion).

Skim through the various online models and see what works for your goals and life situation. Do not be afraid to ask a professional for help if you need it. Investing is too important for random hunches and guesswork.

The Short Version

Age In Bonds - You simply invest your age in bonds or conservative cash equivalents.
Target Date - This takes into account how quickly you need to meet your goal, holding a higher percentage of stocks for a longer time.
"Flight Plan" - This model suggests an early ramp-up as you gain expertise, a "cruising" level throughout most of the prime working years, and a ramp down toward retirement.