Asset allocation by age
Training 795 minutesasset allocation
You are 28 and code at an agency. Your $8,000 retirement savings sit in a deposit. Your parents are 60 and have almost everything in stocks.
Training goal: Match the mix to each timeline
▶ Play this trainingSituation
1. Retirement is 37 years away. That money sits in a 4% deposit.
- Leave it: deposits are safe
- Mostly stocks, about 80-90%
- 100% in one sector, I am young
2. Your parents are 60 and retire in 3 years. They will live mostly on this money. They hold 90% stocks.
- Keep it: stocks earn more
- Switch to 100% deposits
- Move toward 50/50 plus 2 years in cash
3. You go freelance: income now swings from $2,000 to $7,000 a month.
- Grow the cushion to 6-12 months
- Keep the cushion in stocks for growth
- Stop all contributions
4. What is the simplest way to hold your mix?
- Ten funds plus single stocks
- Change the mix with the news
- 2-3 broad funds or a target-date fund
What you will learn
- Long horizon: more stocks. Near goal: more bonds and cash.
- Rule of thumb: 110 minus your age in stocks.
- A simple 2-3 fund mix is easier and cheaper to run.
Your real-life step
Work out 110 minus your age and compare it with your current stock share.
Questions and answers
What is asset allocation?
How a portfolio is split among asset classes like stocks, bonds and cash. It is the biggest driver of risk and return.
What is a good asset allocation by age?
A simple rule: 110 or 120 minus your age in stocks. Adjust for your risk tolerance and income stability.
What is a target-date fund?
A fund tied to your retirement year. As the date approaches, it automatically shifts from stocks to bonds.
More trainings in this module
Numbers are illustrative. A game, not financial advice.