Asset Allocation Basics
Educational only — not financial advice. Updated 2025-11-12.
Your mix of stocks, bonds, and cash sets most of your risk/return profile. Choose a mix you can live with through full cycles.
What Asset Allocation Does
Asset allocation divides your portfolio among growth assets (equities) and stability assets (bonds, cash). It’s the main driver of risk and return over time.
Common Mixes & Who They Fit
| Mix | Volatility | Who it fits |
|---|---|---|
| 60/40 | Moderate | Balanced investors, 10+ year horizon |
| 70/30 | More growth | Comfortable with drawdowns |
| 80/20 | Higher growth | Long horizons, strong stomach |
Glidepaths (Changing Allocation Over Time)
Age 25 : 85/15 [█████████ |██] Age 45 : 70/30 [████████ |███] Age 60 : 60/40 [███████ |████]
Rebalancing & IPS
Document your target mix in an Investment Policy Statement (IPS). Rebalance annually or at bands (±5–10 points).
Checklist
- Pick a target mix you can hold through recessions.
- Automate contributions.
- Rebalance on schedule.
- Revisit annually or at life changes.