Sources: IRS, SEC, Federal Reserve, U.S. Bureau of Labor Statistics & U.S. Census Bureau. See our editorial standards.
How you divide your portfolio among asset classes like stocks, bonds, and cash to balance risk and return.
Definition: How you divide your portfolio among asset classes like stocks, bonds, and cash to balance risk and return.
Asset allocation is the single biggest driver of long-term portfolio results — bigger than picking individual investments. A younger investor might hold mostly stocks for growth, while someone near retirement shifts toward bonds for stability. Rebalancing periodically keeps your allocation aligned with your risk tolerance and goals.
A common rule of thumb: stock allocation ≈ 110 − your age (in percent).
A 30-year-old following the "110 minus age" guideline might hold 80% stocks and 20% bonds; a 70-year-old might hold 40% stocks and 60% bonds.
Put this concept to work with our free Retirement Calculator.
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