What are age-based asset allocation guidelines?

You may have heard of age-based asset allocation guidelines like the Rule of 100 and Rule of 110. The Rule of 100 determines the percentage of stocks you should hold by subtracting your age from 100. If you are 60, for example, the Rule of 100 advises holding 40% of your portfolio in stocks.

Should you allocate your retirement assets by age?

Some recommend portfolio asset allocation by age, under the assumption that the younger you are, the more aggressive you should be with your retirement asset allocation. That may be true to some degree, but some investors are naturally more conservative than others.

What are some examples of asset allocation models by age?

Let's look at some examples of asset allocation models by age. Using [age minus 20] for bond allocation, a starting age of 20, and a retirement age of 60, a one-size-fits-most allocation would be 80/20. This fits a young investor with a low risk tolerance and a middle-aged investor with a moderate risk tolerance.