What Is Age-Based Allocation (100 − Age)?
There is a very old answer to 'at my age, how much should I hold in stocks': just subtract your age from 100. Is that really so?
The 100 − Age Rule
The representative rule of thumb for age-based allocation is 'stock weight = 100 − age.'
For example, at age 30 you would hold stocks 70% / bonds 30%, and at age 60 stocks 40% / bonds 60%. It is a simple rule capturing the intuition that as you age, your investment horizon (time horizon) shortens, so you should reduce risky assets. Being easy to calculate, it has been quoted for a long time.
Why the 110/120 Variants Appeared
Recently, variants like '110 − age' and '120 − age' have also emerged. By using a larger number instead of 100, they call for keeping the stock weight higher.
There are two reasons. First, life expectancy has lengthened, so assets must keep working long after retirement, and second, low bond returns alone may struggle to keep up with rising prices. For example, at age 30, 100 − age gives stocks 70%, but 120 − age gives stocks 90%.
Whatever number you use (100/110/120), this is only a rule of thumb, not a validated optimal formula.
Limitations of This Rule
Setting asset allocation by age alone draws several criticisms.
① It assumes the time horizon from age alone. Even at the same age, retirement timing, goals, and income stability differ. ② It ignores risk tolerance. It treats those who can withstand drawdowns and those who cannot the same way. ③ It does not consider other assets or pensions. ④ Holding too many bonds exposes you to longevity risk and inflation. If you live long but lack growth assets, you may run short of money later in life.
In the end, it is best used only as a 'starting-point reference' and adjusted to your own situation.
常见问题
Q. Should I follow the 100 − age rule exactly?
You can use it as a reference starting point, but you don't need to follow it exactly. Even at the same age, retirement timing, risk tolerance, and other assets differ. Recently, some use 110/120 to reflect longer life expectancy. There is no correct formula.
Q. If I'm older, should I always reduce stocks?
Not necessarily. Increasing bonds excessively erodes purchasing power against rising prices, and if you live long, a shortage of growth assets can cause difficulties later in life. Age is just one factor; you should look at the whole situation together.
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