Diversified portfolio allocation has commonly-cited starting frameworks — not a single correct answer, but reference points to adjust from based on your actual age and risk tolerance rather than guessing.

The Reference Frameworks

The classic "100 minus age" rule: subtract your age from 100 for your stock percentage, rest in bonds — 75% stocks at 25, 50% at 50, 30% at 70. A more stock-heavy variant, "110 minus age," reflects longer modern life expectancies. By risk tolerance at age 40, sample allocations look like: Conservative (60% bonds, 30% stocks, 10% cash), Moderate (60% stocks, 35% bonds, 5% cash), Aggressive (85% stocks, 10% bonds, 5% cash).

Practically, this means: These are starting frameworks, not commandments — your actual risk capacity (financial ability to withstand losses without jeopardizing goals) may differ from your risk tolerance (emotional comfort with volatility). Someone with high risk tolerance but low risk capacity (limited savings, near a major expense) should weight toward their capacity, not just their comfort level.

The Young Investor With a Long Horizon: A more aggressive allocation (per "100 minus age") is standard and defensible — decades until you'd need the money means more capacity to ride out volatility.

Someone Approaching a Near-Term Goal (5-10 years): Regardless of age, a more conservative allocation for that specific goal's money protects against a downturn right before you need it — separate this money's allocation from your longer-horizon retirement funds.

Build Your Allocation

  1. Start with a framework (100-minus-age or a risk-tolerance-based sample) as your baseline.
  2. Adjust down in stock exposure for any money with a near-term (under 5-10 year) use date.
  3. Distinguish your risk tolerance from your risk capacity — weight toward whichever is more conservative.

See what is an index fund and how bond yields work for the building blocks of any allocation.