Is the '100 minus your age' rule still useful?

It's a fine starting point for a rough stock percentage, but it ignores your actual risk capacity (how much you can afford to lose) and risk tolerance (how you behave during a crash). Use it as a first guess, then adjust based on your real situation.

Should I include bonds if I'm young and won't retire for 30 years?

Many long-horizon investors hold little to no bonds early on since they have decades to recover from downturns. Some prefer a small bond allocation anyway simply to reduce volatility enough that they don't make emotional decisions during a crash.

How often should I check my asset allocation?

Once or twice a year is typically enough, along with checking after major life changes like a new job, marriage, a child, or getting within a few years of a major goal like retirement or a home purchase.

Does asset allocation apply to money outside retirement accounts?

Yes. The same stocks-vs-bonds-vs-cash logic applies to any investment account, though taxable accounts add considerations like capital gains taxes when you sell to rebalance.

Asset Allocation: How to Split Your Money Between Stocks and Bonds

A practical guide to setting your stock-to-bond mix by age and risk tolerance, without relying on outdated rules of thumb.

Asset allocation is the decision that matters more than which fund you pick. It's the split between stocks, bonds, and cash in your portfolio. Get this wrong and no amount of low-fee index funds will save you from panic-selling in a downturn or running out of growth before retirement.

This isn't about picking hot stocks or timing the market. It's about matching your investment mix to your timeline and your ability to stomach volatility, so you actually stay invested long enough for compounding to work.

What Asset Allocation Actually Means

Your asset allocation is simply the percentage of your portfolio in each major category:

Stocks (equities): Higher long-term growth, higher short-term swings
Bonds (fixed income): Lower growth, more stability, income
Cash and cash equivalents: No growth, no risk, immediate access

Stocks have historically driven most of the growth in a portfolio over long periods. The S&P 500's average annual total return since 1928 has been about 9.98%, including dividends. That number includes the Great Depression, multiple recessions, and two crashes over 30% — it's not a cherry-picked good stretch.

Bonds won't grow your money nearly as fast, but they cushion the ride. When stocks drop 20% in a bad year, a portfolio that's 40% bonds drops a lot less than one that's 100% stocks.

The Old Rule of Thumb (and Why It's Too Simple)

You may have heard: subtract your age from 100 (or 110, or 120) to get your stock percentage. A 30-year-old holds 70-90% stocks; a 60-year-old holds 40-60%.

It's not wrong, exactly. It's just incomplete. Age is a decent proxy for time horizon, but it ignores two things that matter just as much:

How much of that money you can actually afford to lose without changing your life
How you actually behave when your account drops 25% in three months

Two 45-year-olds with the same account balance can need completely different allocations — one has a pension and paid-off house, the other is the sole earner supporting three kids with a mortgage.

Risk Tolerance vs. Risk Capacity

These get used interchangeably, but they're different things.

Risk capacity is the math: how much you can afford to lose based on your timeline, income stability, and other assets. Someone investing money they won't touch for 25 years has high risk capacity, even if they're nervous about it.

Risk tolerance is psychological: how much volatility you can handle without doing something destructive, like selling everything at the bottom of a crash. This one matters more than people admit. The "correct" allocation on paper is worthless if it causes you to bail out during a downturn.

If you know you'd panic-sell a 100%-stock portfolio during a 2008-style crash, a slightly more conservative mix that you'll actually hold onto beats an aggressive one you'll abandon.

A Practical Framework by Timeline

Instead of age alone, think in terms of when you need the money.

Time Until You Need the Money	General Stock/Bond Mix	Why
20+ years (early retirement savings)	80-100% stocks	Time to recover from downturns; growth matters most
10-20 years (mid-career retirement savings)	60-80% stocks / 20-40% bonds	Still growth-focused, but some cushioning begins
3-10 years (approaching a goal: retirement, house down payment)	40-60% stocks / 40-60% bonds	Reducing exposure to a bad sequence right before you need cash
Under 3 years	0-20% stocks, mostly bonds/cash	Capital preservation over growth — you can't afford a crash right before withdrawal

These are starting points, not prescriptions. Someone with a pension, rental income, or a very high risk tolerance might stay more aggressive later into retirement. Someone who's risk-averse or supporting dependents might scale back earlier.

Bonds Aren't Dead Weight Right Now

For years, ultra-low interest rates made bonds feel pointless — barely any yield for the safety they provided. That's changed. The 10-year Treasury note yield, the main benchmark for mortgages, auto loans and credit card debt, was around 4.77%. That means the "safe" part of your portfolio is actually generating meaningful income again, not just sitting there as dead weight during a stock rally.

Don't Set It and Forget It Forever

Your allocation isn't a one-time decision. As your timeline shortens or your life circumstances change — new job, new dependents, a windfall, a layoff — the right mix shifts too. Market movement alone can also drift your percentages away from your target, which is a separate maintenance task from choosing the allocation in the first place.

If you're not sure whether your current mix actually matches your situation, running your numbers through a quick financial health check — like the one on Grade My Finance — can help you see where your portfolio stands relative to your goals, not just relative to the market.

The Bottom Line

Age-based rules are a reasonable starting point, not a finish line. The right stock-to-bond split depends on when you need the money, how much you can genuinely afford to lose, and how you actually behave when markets get ugly. Pick a mix you can hold onto through a real downturn — that beats a theoretically optimal one you'll abandon in a panic.