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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
How you divide your money between stocks, bonds, and other investments.
Why It Matters
Asset allocation is the single biggest factor in your investment returns - more important than individual stock picks. A classic rule of thumb: subtract your age from 110 to get your stock percentage (age 30 = 80% stocks, 20% bonds). Studies show asset allocation explains over 90% of portfolio return differences between investors.
Key Points
- Young investors can be aggressive (90% stocks) because they have time to recover from crashes
- Near retirement, shift to conservative (40-60% bonds) to protect what you've built
- Target-date funds (like 'Target 2050') automatically adjust allocation as you age
Related Terms
Common Questions
How you divide your money between stocks, bonds, and other investments. Asset allocation is the single biggest factor in your investment returns - more important than individual stock picks. A classic rule of thumb: subtract your age from 110 to get your stock percentage (age 30 = 80% stocks, 20% bonds).
Asset allocation is the single biggest factor in your investment returns - more important than individual stock picks. A classic rule of thumb: subtract your age from 110 to get your stock percentage (age 30 = 80% stocks, 20% bonds). Studies show asset allocation explains over 90% of portfolio return differences between investors.
Young investors can be aggressive (90% stocks) because they have time to recover from crashes
Near retirement, shift to conservative (40-60% bonds) to protect what you've built
Target-date funds (like 'Target 2050') automatically adjust allocation as you age