What asset allocation should I have at my age?

A common rule of thumb is to hold your age in bonds (e.g., 30% bonds at age 30), but many advisors now recommend 110 or 120 minus your age in stocks. A 30-year-old might hold 80-90% stocks and 10-20% bonds.

Should I change my allocation as I get older?

Yes. As you approach retirement, gradually shift from stocks to bonds to reduce risk. Most target-date funds do this automatically, called a glide path.

Asset Allocation by Age: How to Build Your Portfolio

Asset allocation — how you divide your portfolio between stocks, bonds, and cash — is the single biggest driver of investment returns and risk. Here’s how to get it right at every age.

Model Portfolios by Age

Aggressive (Your 20s-30s)

Asset Class	Allocation	Example Funds
U.S. stocks	60%	VTI, VTSAX, FSKAX
International stocks	30%	VXUS, VTIAX, FTIHX
Bonds	10%	BND, VBTLX, FXNAX
Total	100%

Risk level: High | Expected return: 8-10% long-term | Worst year possibility: -35% to -45%

Moderate Growth (Your 40s)

Asset Class	Allocation	Example Funds
U.S. stocks	50%	VTI or VTSAX
International stocks	20%	VXUS or VTIAX
U.S. bonds	25%	BND or VBTLX
International bonds	5%	BNDX or VTABX
Total	100%

Risk level: Moderate | Expected return: 7-8% | Worst year possibility: -25% to -35%

Balanced (Your 50s)

Asset Class	Allocation	Example Funds
U.S. stocks	40%	VTI or VTSAX
International stocks	15%	VXUS or VTIAX
U.S. bonds	35%	BND or VBTLX
International bonds	5%	BNDX or VTABX
TIPS (inflation-protected)	5%	VTIP or SCHP
Total	100%

Risk level: Moderate-Low | Expected return: 6-7% | Worst year possibility: -20% to -25%

Conservative (Early Retirement, 60s)

Asset Class	Allocation	Example Funds
U.S. stocks	30%	VTI or VTSAX
International stocks	10%	VXUS or VTIAX
U.S. bonds	40%	BND or VBTLX
TIPS	10%	VTIP or SCHP
Short-term bonds/cash	10%	VGSH or SCHO
Total	100%

Risk level: Low | Expected return: 5-6% | Worst year possibility: -10% to -15%

Income/Preservation (Late Retirement, 70s+)

Asset Class	Allocation	Example Funds
U.S. stocks	25%	VTI
International stocks	5%	VXUS
U.S. bonds	35%	BND
TIPS	15%	VTIP
Short-term bonds	10%	VGSH
Cash/money market	10%	VMFXX
Total	100%

Risk level: Very Low | Expected return: 4-5%

Age-Based Allocation Rules of Thumb

Rule	Formula	Example (Age 35)	Stocks	Bonds
Your age in bonds	Age = Bond %	35% bonds	65%	35%
110 minus age	110 - Age = Stock %	75% stocks	75%	25%
120 minus age	120 - Age = Stock %	85% stocks	85%	15%

Modern financial planning typically uses 110 or 120 minus your age because people live longer and need more growth.

The Three-Fund Portfolio

The simplest effective portfolio:

Fund	Purpose	Suggested Allocation
U.S. total stock market (VTI/VTSAX)	Domestic equity growth	50-70%
International total stock (VXUS/VTIAX)	Global diversification	15-30%
U.S. total bond market (BND/VBTLX)	Stability and income	10-30%

This covers 10,000+ stocks and 10,000+ bonds with just three funds. Total expense ratio: ~0.05%.

How Different Allocations Perform

Historical performance of different stock/bond mixes (1926-2024):

Allocation	Avg. Annual Return	Best Year	Worst Year	Max Drawdown
100% Stocks	10.3%	+54% (1933)	-43% (1931)	-51% (2007-09)
80/20 (Stocks/Bonds)	9.4%	+45%	-34%	-40%
70/30	8.9%	+39%	-27%	-32%
60/40	8.3%	+33%	-21%	-26%
50/50	7.6%	+28%	-16%	-22%
40/60	6.8%	+23%	-12%	-18%
20/80	5.2%	+14%	-6%	-10%
100% Bonds	5.1%	+33% (1982)	-13% (2022)	-17%

When to Rebalance

Method	How It Works	Pros	Cons
Calendar (annual)	Rebalance on same date each year	Simple, disciplined	May be too frequent/infrequent
Threshold (5%)	Rebalance when allocation drifts 5%+ from target	Responsive	Requires monitoring
Calendar + threshold	Check quarterly, rebalance only if 5%+ drift	Best of both	Slightly more complex

Tax-Efficient Rebalancing

Strategy	How to Do It
Redirect new contributions	Put new money into the underweight asset class
Use dividends/distributions	Set dividends to buy the underweight class
Rebalance in tax-advantaged accounts	Move money in 401(k)/IRA where there’s no tax
Tax-loss harvest	Sell losers in taxable accounts to rebalance + get tax deduction

Common Asset Allocation Mistakes

Mistake	Why It’s a Problem
100% stocks at age 60	One bad year could devastate your retirement
100% bonds at age 30	Insufficient growth; inflation eats purchasing power
Home country bias (all U.S.)	Missing international diversification
Too many funds (15+)	Complexity without benefit; overlap dilutes returns
Never rebalancing	Portfolio drift changes your risk profile
Chasing last year’s winner	Performance chasing usually hurts returns
Ignoring asset location	Tax-efficient placement matters as much as allocation