Choosing a stock-to-bond mix sets the tone for every decision that follows. Get it roughly right and market noise matters less. Miss by a mile and even great funds disappoint.

A timeless, easy framework—the “110 minus your age” rule—offers a practical starting point, then thoughtful adjustments personalize it.

Core Rule

Begin with: equity % ≈ 110 − your age. The remainder goes to bonds. At 40, that implies 70% stocks and 30% bonds; at 65, roughly 45% stocks and 55% bonds. It’s not precision engineering. It’s a baseline that balances growth needs against the rising importance of capital stability.

Why It Works

Stocks historically compound faster but swing more. Bonds dampen those swings and provide a steadier income stream. As the years ahead shorten, downside protection matters more than squeezing out every extra percentage point. This glide path steadily shifts risk from growth to stability without complex modeling.

Personal Fit

Two investors the same age can need different mixes. Risk capacity (ability) and risk tolerance (comfort) are not identical. Large emergency reserves, stable income, or flexible spending raise capacity for stocks. If volatility causes sleepless nights, lower the equity weight by 5–10 points—even if capacity is high.

Time Horizon

Think in buckets. Money needed within 0–2 years belongs in cash-like holdings regardless of age. Goals 3–7 years out fit better in shorter-term bonds. Long-horizon goals—retirement decades away or legacy assets—deserve more equity exposure. Align the rule with timelines, not just birthdays.

Bond Choices

Not all “bonds” behave alike. A core bond fund mixing high-quality government and investment-grade corporates offers balance. Short-term funds reduce interest-rate sensitivity; intermediate funds diversify rate and credit risk. Be cautious with long-duration or lower-quality bonds if the goal is ballast rather than extra yield.

Stock Mix

Diversify stocks broadly across size, style, and geography. A simple split: U.S. total-market plus international developed and emerging markets. Tilt modestly toward value or small-cap only if you can stick with it during multi-year dry spells. Concentration in a few individual names can quietly inflate risk.

Inflation Guard

Inflation erodes purchasing power, especially over long retirements. Equities are a primary hedge, but bonds can help too. Treasury Inflation-Protected Securities (TIPS) and short-duration bonds add resilience. For investors seeking income, dividend-growth stocks can complement, not replace, the bond sleeve.

Rebalance Plan

Markets drift. Set 5% bands around targets and rebalance when an asset class crosses a band. Prefer using new contributions and distributions first; then trim winners in tax-advantaged accounts. A semiannual checkup paired with an annual “deep” review keeps the mix aligned without overtrading.

Tax Savvy

Location matters. Place bonds and other tax-inefficient assets in tax-deferred or tax-free accounts when possible. Hold broad, low-turnover equity index funds in taxable accounts for better tax efficiency. If selling in taxable accounts to rebalance, consider tax-loss harvesting or gain harvesting based on your bracket.

Common Tweaks

Some prefer “120 minus age” if they have strong savings, secure income, and high risk capacity. Others use “100 minus age” for a more conservative stance. A middle path is the original 110 rule, nudged by 5–10 points to reflect personal circumstances rather than market headlines.

When To Deviate

Adjust deliberately when life changes: retirement date shifts, a big windfall, new dependents, or a major spending goal. Don’t overhaul based on recent performance. If equities soared and now exceed your band, trim. If they slumped, buy back to target. Process beats prediction.

Final Check

Stress-test the plan. Ask: Could this mix fund essential expenses through a severe downturn without forced selling? Is the cash reserve adequate? Are fees low and holdings simple enough to manage under pressure? If the answers are yes, the allocation is likely fit for purpose.

Conclusion

A clear rule of thumb, refined to your goals and temperament, turns asset allocation from guesswork into a repeatable discipline. Start with 110 minus age, tailor for risk and timelines, diversify broadly, and rebalance on schedule. What single adjustment—raising savings, tightening bands, or simplifying holdings—will you make today to strengthen your mix?