Hey everyone,
"Asset allocation" sounds intimidating, but it's really just one question: how much of your money is in stocks (higher growth, higher swings) versus bonds and cash (steadier, lower growth)? The right split isn't fixed — it should move as you get closer to actually needing the money.
The classic rule of thumb
A long-standing shorthand is "110 minus your age" equals the percentage you hold in stocks, with the rest in bonds. It's not gospel, and plenty of modern advisors now push that stock percentage even higher for young investors, but it captures the right idea:
| Age | Rough stock allocation | Rough bond allocation |
|---|---|---|
| 20s | 90–100% | 0–10% |
| 30s | 80–90% | 10–20% |
| 40s | 70–80% | 20–30% |
| 50s | 60–70% | 30–40% |
| 60s+ | 40–60% | 40–60% |
These are starting points, not commandments — your actual timeline, income stability, and comfort with volatility all matter too.
Why the shift happens at all
Stocks have historically outgrown bonds over long periods, but they get there with far bumpier rides along the way. When you're decades from needing the money, you can ride out a bad five-year stretch — you have time to wait for a recovery. When retirement (or another goal, like a home down payment) is a few years away, a sudden 30% drop right before you need to withdraw is a very different problem. Shifting toward bonds over time trades some long-run growth for protection against bad timing right when it would hurt most.
What this looks like in practice
You don't need to manually rebalance a spreadsheet every year. Most brokerages offer "target-date" funds that do this automatically, gradually shifting the stock-to-bond mix as a set year approaches. It's also worth revisiting your own mix any time a major life event changes your timeline — a new goal, a career change, or getting closer to retirement.
Once you know your rough target, our What If calculator can help you see what consistent contributions at that mix could actually become, and this piece on monthly investing habits covers the other half of the equation — how much and how often you put money in.
More soon,
Learn to Love Money