Asset Allocation Calculator

Frequently Asked Questions

What is the "120 minus age" rule?

A simple rule of thumb: equity allocation = 120 - your age. A 40-year-old holds 80% stocks, a 70-year-old 50%. The older "100 minus age" rule is generally considered too conservative given longer life expectancies.

How important is asset allocation?

A landmark 1986 study (Brinson) found about 90% of portfolio return variance comes from asset allocation, not security selection. Whether you own stocks vs. bonds matters far more than which specific stocks.

Should I include international stocks?

Most research supports a 20-40% international allocation within equities. It diversifies against US-specific risks and currency moves. US-only investors did exceptionally well in the 2010s, but the prior decade favored international by a wide margin.

Where do alternatives like REITs and gold fit?

A 5-15% sleeve in real assets (REITs, commodities, TIPS) can reduce drawdowns in inflationary regimes. Gold has near-zero long-term real return but low correlation. Avoid alternatives that charge more than 1%; fees often eat the diversification benefit.

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Estimates only. Not investment advice.

Investment Disclaimer: Estimates only. Not investment advice.

This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.

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How This Calculator Works

This tool turns three inputs - your age, investment horizon, and risk tolerance - into a target split across three asset classes: stocks, bonds, and cash. The backbone is the age-based 110 rule: stock allocation starts at 110 − age, so a 35-year-old begins at 75% stocks. Your risk choice then shifts that figure by ±15 percentage points (conservative −15, moderate 0, aggressive ±15), and the result is clamped to the 10–95% range so no portfolio is ever all-or-nothing. Cash gets a 5% baseline (10% if conservative), plus an extra 10% when your horizon is 5 years or less, because money you need soon should not be exposed to equity volatility. Bonds absorb whatever remains. The calculator then estimates an expected annual return as the weighted average of historical asset-class returns and a portfolio risk figure using a simple two-asset variance formula that assumes a 0.2 stock–bond correlation.

Formula and Inputs

Stock% = clamp(110 − age + risk adjustment, 10, 95). Expected return = w_s×10% + w_b×5% + w_c×3%, using the historical 1928–2024 nominal averages baked in: stocks ≈10% return / 15.5% standard deviation, 10-year Treasuries ≈5% / 7%, and cash (T-bills, high-yield savings) ≈3% / 0.5%. Portfolio risk σ = √(w_s²σ_s² + w_b²σ_b² + w_c²σ_c² + 2w_sw_bσ_sσ_b×0.2). The output is labeled by stock weight: Aggressive Growth (≥80%), Growth (60–79%), Balanced (40–59%), Conservative Income (25–39%), or Capital Preservation (<25%).

Worked Example

Take a 35-year-old, moderate risk, 30-year horizon. Stocks = 110 − 35 + 0 = 75%. Cash baseline is 5% (horizon is well above 5 years, no bump), leaving bonds at 100 − 75 − 5 = 20%. Expected return = 0.75×10 + 0.20×5 + 0.05×3 = 8.65%. The portfolio risk works out near 11.7%, so in a typical year (one standard deviation, roughly 68% of years) returns land between about −3.1% and +20.4%. Switch to aggressive and stocks jump to 90%, lifting expected return but widening that band considerably.

Common Mistakes

Treating the 110 rule as gospel - it is a starting heuristic, not a personalized plan; spending needs, pensions, and other income all matter.

Picking "aggressive" based on a bull market rather than how you behaved in the last crash - the right risk level is the one you will not abandon at the bottom.

Ignoring the cash bump for short horizons; money needed within five years has little business in stocks.

Reading the expected return as a guarantee - it is a long-run average, and the risk figure shows how wide single-year outcomes really are.

Tips & FAQ

Rebalance once a year or whenever any class drifts more than about 5 percentage points from target; this enforces a disciplined "sell high, buy low." The correlation assumption (0.2) understates risk in crises, when stock–bond correlations can spike toward 1, so treat the risk band as a normal-times estimate. The historical 10% equity return is nominal - subtract roughly 2–3% for inflation to gauge real growth. This is an educational model, not investment advice; a fiduciary advisor can tailor an allocation to your full financial picture.

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