Asset Allocation Worksheet

Analyze your portfolio allocation, compare to recommended targets, and get rebalancing guidance.

Understanding Asset Allocation

1What is Asset Allocation?

Asset allocation is dividing your investments among different asset classes like stocks, bonds, and cash. It's the most important decision you'll make as an investor.

✓90%+ of returns come from asset allocation, not stock picking
✓Diversification reduces risk without sacrificing returns
✓Rebalancing maintains your target allocation over time

📊 Historical Returns (1926-2023)

• US Large Stocks: 10.2% avg annual return
• US Small Stocks: 11.8% avg annual return
• International Stocks: 8.4% avg annual return
• Bonds: 5.3% avg annual return
• Cash/T-Bills: 3.3% avg annual return

2Model Portfolios by Risk Level

Conservative

Low Risk

30% Stocks / 50% Bonds / 20% Cash

For retirees or short time horizons

Moderate

Medium Risk

60% Stocks / 30% Bonds / 10% Cash

Balanced growth and stability

Aggressive

High Risk

85% Stocks / 10% Bonds / 5% Cash

Long time horizon, high growth focus

3The Classic Age-Based Rule

Traditional: "Age in Bonds"

Age 35 = 35% bonds, 65% stocks

Modern: "120 Minus Age"

120 - 35 = 85% stocks, 15% bonds

More aggressive for longer lifespans

Vanguard Life Strategy

60/40 moderate allocation, adjust by ±20%

4When to Rebalance

🔄 Rebalancing Strategies

Calendar-based: Quarterly or annually (simplest)
Threshold-based: When allocation drifts 5%+ from target
Hybrid: Check quarterly, rebalance if 5%+ off

💡 Pro Tip: Rebalance using new contributions first to minimize taxes in taxable accounts.

💡 Asset Allocation Best Practices

• Diversify globally: 20-40% international stocks
• Include small caps: Historically higher returns
• Consider TIPS: Inflation-protected bonds
• REITs for income: 5-10% real estate exposure
• Emergency fund first: 3-6 months before investing

• Tax location matters: Bonds in tax-advantaged, stocks in taxable
• Low-cost index funds: 0.03-0.20% expense ratios
• Avoid market timing: Stay invested through volatility
• Review annually: Adjust allocation as life changes
• Limit alternatives: Crypto, commodities ≤5% max

Download Excel Template

Asset Allocation FAQs

A common rule is '120 minus your age' in stocks (e.g., age 35 = 85% stocks). However, this should be adjusted for your risk tolerance, time horizon, and financial situation. A 35-year-old with stable income might be comfortable at 90% stocks, while someone with variable income might prefer 70%. The key is choosing an allocation you can stick with through market volatility.