Financial literacy education for the modern era.

Back to Glossary
InvestingIntermediate

AssetAllocation

The strategic distribution of investments across different asset classes to balance risk and reward according to your goals, time horizon, and risk tolerance.

10 min read
Interactive

Build Your Portfolio

30
Rule of thumb suggestion: 80% stocks, 20% bonds
Stocks
60%

Higher growth potential, higher volatility

Bonds
30%

Stable income, lower risk

Real Estate
5%

Inflation hedge, diversification

Cash
5%

Liquidity, stability (auto-calculated)

Risk Profile
Growth

Balanced growth with moderate risk

Expected Annual Return7.7%
Expected Volatility14.6%
GrowthPortfolio
Stocks60%
Bonds30%
Real Estate5%
Cash5%

Classic Portfolio Models

Key Principles

01

Diversification

Spreading investments across different asset classes reduces risk without necessarily reducing returns. It's often called the only 'free lunch' in investing.

02

Time Horizon

Your investment timeline should guide your allocation. Longer horizons can handle more volatility, while shorter ones need more stability.

03

Rebalancing

Periodically adjusting your portfolio back to target allocations helps maintain your intended risk level and can improve long-term returns.

04

Age-Based Allocation

A common rule: subtract your age from 110 to get your stock percentage. A 30-year-old might hold 80% stocks, while a 60-year-old might hold 50%.