A Simple Guide to Asset Allocation

Asset Allocation

Many investors use a common rule of thumb to help with their asset allocation. They simply hold a percentage of stocks equal to 100 minus their age, and put the remaining amount in fixed income assets. So for a typical 30 year old millennial, 70% of his portfolio would be in equities, and the rest (30%) would be comprised of bonds and other relatively safe investments. Determining stock allocation based on age is an effective strategy to gradually reduce one’s investment risk over time. 🙂


But this 100 minus age guideline is starting to become outdated because people are living longer, and bond yields are at historical lows. So we can modify the rule to be more suitable for the current times. For example, we can increase the baseline to use 110 minus our age. Those who have a higher risk tolerance than average can even go with 120 minus their age. Also, men have an average life expectancy of 80 years old in this country, while women can expect to live to 84. Since women live about 4 years longer than men on average, they would probably have higher costs in retirement than men. This means ladies have an incentive to be a little more aggressive with their asset allocation, especially during their working years compared to guys, assuming all other factors being equal. 🙂

Keep in mind that this guide to asset allocation speaks only to financial assets within a liquid portfolio. It’s also important to consider real estate, geographical diversification, taxation, idiosyncratic circumstances, and other factors when building a balanced portfolio. The 100 minus your age rule isn’t right for everyone, but it’s a good place to start for those who are just starting out to invest. 😀

Random Useless Fact:


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11/17/2016 7:23 am

I better get with this asset allocation thing-of-a-ma-jig.
I am 66 and have 98.5% in equities.
Can’t see why I would change too much though as I get > $50K in divs per year
Still working so 1) I get to pay off at least some of my mid-life crisis car (I like that mid-life business as that gives me another 66 years to enjoy the car) 2)I get to continue to max out the RRSP and TFSA so when I do retire I will have that much more gas money. 3)The company 50/50 pension plan keeps on increasing 4) My CPP/QPP will be that much more when I tap it for funds 5) While I am employed there is that much less personal expenditure as I am on the road in sales so I spend less at home.
Trump is getting me worried though but look at this from some 25 years ago and it might make you wonder at least a little bit about Trump

VIDEO Uncovered Trump Interview From Over 25 Years Ago Will Shock A Lot of People – YouTube
This is from Ophra. Hope the link works.


11/20/2016 10:31 pm

Sorry to say it but I think your random fact is probably better than your article this time! I had a good laugh to myself about it. I never thought of it that way.

Min Min Tong
12/20/2016 3:09 pm

Great points

Random fact: So true.

02/23/2017 7:45 am

[…] stocks and bonds using the age rule. This basically means keep your age in bonds, and the rest in stocks. So for a 25 year old, his […]

10/18/2017 5:30 am

[…] how much of each we should have, and find low cost index funds to satisfy each class. The 100 minus age rule is a good place to start when it comes to determining one’s asset […]