Asset Allocation Calculator
Why asset allocation matters
Asset allocation is the process of spreading your investments across major asset classes—typically stocks, bonds, and cash—so your portfolio’s risk and return potential better match your goals. Instead of trying to pick the “best” individual investments, allocation focuses on the bigger drivers of long‑term results: how much of your portfolio is exposed to growth (stocks) versus stability and income (bonds) and liquidity (cash). Diversification across asset classes can reduce the impact of any single market shock and can make your overall investing experience more predictable.
This calculator uses a simple, widely cited rule of thumb that ties stock exposure to age, then adjusts it based on a risk preference. It is meant to provide a starting point you can refine based on your personal situation.
Inputs
- Age: Used as a proxy for time horizon and ability to tolerate volatility.
- Total portfolio: Used to convert the recommended percentages into dollar amounts.
- Risk level: Conservative, Moderate, or Aggressive—this nudges stock exposure up or down and sets a different cash target.
Formulas used (age rule + risk adjustment)
Let:
- a = your age
- Δr = risk adjustment (Conservative = −10, Moderate = 0, Aggressive = +10)
- C = cash percentage (Conservative = 15, Moderate = 10, Aggressive = 5)
The recommended stock percentage is:
After choosing a cash target C, the bond percentage is the remainder:
B = 100 − S − C
Finally, dollar amounts are computed from your total portfolio value P:
- Stocks ($) = P × (S / 100)
- Bonds ($) = P × (B / 100)
- Cash ($) = P × (C / 100)
How to interpret your results
The output is a recommended mix—not a list of specific funds or securities. You can use it in a few practical ways:
- As a starting allocation: If you’re building a portfolio from scratch, the percentages give you an initial target.
- As a rebalancing guide: If your current portfolio has drifted (e.g., stocks grew faster than bonds), you can compare your current percentages to the target and decide whether to rebalance.
- To visualize risk tradeoffs: Higher stock percentages generally increase expected long‑term growth but can produce larger swings; higher bond/cash allocations may dampen volatility but can reduce growth potential.
Remember that “cash” in this context is about liquidity and stability (emergency reserves, near‑term spending needs, or dry powder). Aggressive profiles typically hold less cash, while conservative profiles hold more.
Worked example
Example: A 35‑year‑old investor with a $50,000 portfolio chooses Moderate risk.
- Base stock rule: 110 − 35 = 75%
- Risk adjustment (Moderate): Δr = 0 → stocks stay S = 75%
- Cash target (Moderate): C = 10%
- Bonds: B = 100 − 75 − 10 = 15%
- Dollar amounts:
- Stocks: $50,000 × 0.75 = $37,500
- Bonds: $50,000 × 0.15 = $7,500
- Cash: $50,000 × 0.10 = $5,000
If the same investor selected Aggressive, the calculator would add +10 to stocks and reduce cash to 5%, pushing more of the portfolio into equities (higher upside, higher volatility).
Risk profiles at a glance
| Risk profile | Δr stock adjustment | Cash target (C) | What it generally means |
|---|---|---|---|
| Conservative | −10% | 15% | Lower volatility focus; more stability/liquidity |
| Moderate | 0% | 10% | Balanced approach between growth and stability |
| Aggressive | +10% | 5% | Higher growth focus; larger market swings expected |
Limitations and assumptions (important)
- Rule-of-thumb, not personalized advice: Age is only one factor. Real allocations also depend on goals, time horizon, job stability, emergency savings, debt, taxes, and preferences.
- “Stocks/bonds/cash” are broad buckets: The calculator does not distinguish between U.S. vs international stocks, government vs corporate bonds, or cash vs cash equivalents.
- Does not model risk capacity: Two people of the same age may have very different ability to take risk (income, dependents, large upcoming expenses, etc.).
- No inflation or return forecasting: The calculator does not project growth, expected returns, or probability of loss.
- Edge cases are capped: Stock percentage is clamped between 0% and 100%. Very young ages with aggressive settings may hit the 100% cap; very old ages with conservative settings may push stocks toward 0%.
- Cash target is simplified: Your needed cash could be higher (near‑term spending) or lower (separate emergency fund outside the portfolio).
Educational disclaimer: This tool provides a general educational estimate and should not be considered financial, tax, or investment advice. Consider consulting a qualified professional for guidance tailored to your situation.