Your mix of stocks, bonds, and cash is the single most important determinant of your investment returns and risk. Learn how to build a portfolio that matches your goals.
Asset allocation is the process of dividing your investment portfolio among different asset categories – typically stocks, bonds, and cash. Your allocation determines the vast majority of your portfolio's volatility and return.
Studies have shown that asset allocation explains more than 90% of the variability in a portfolio's returns over time. Stock picking and market timing play a much smaller role.
20% stocks, 50% bonds, 30% cash
For short time horizons or low risk tolerance.
60% stocks, 30% bonds, 10% cash
The classic "balanced" portfolio.
80% stocks, 15% bonds, 5% cash
For long horizons and high risk tolerance.
The longer you have, the more you can allocate to stocks, which have higher expected returns but greater short‑term risk.
Your emotional ability to withstand losses should guide the mix. If you panic during a 20% drop, you need more bonds and cash.
Different goals (retirement, house down payment, education) may require different allocations and timeframes.
Adjust the percentages of stocks, bonds, and cash to see the estimated portfolio return and risk (based on historical averages).
Adjust the sliders and click analyze.
Assumptions: Stocks 8% return / 15% risk, Bonds 4% / 5%, Cash 2% / 0.5%. Correlations: Stocks‑Bonds 0.2, Stocks‑Cash 0, Bonds‑Cash 0.1.