Optimal Finance Daily - Financial Independence and Money Advice 2998: The “Minus Your Age” Rule of Thumb for Asset Allocation by Craig Stephens of Retire Before Dad
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Jan 8, 2025 Explore the intriguing 'minus your age' rules for asset allocation, adjusting stock-to-bond ratios to fit personal risk and age. Discover how consistent strategies contribute to financial stability while avoiding frequent changes. Learn about the critical role of bonds in managing risk and why younger investors should focus on growth before shifting to bonds as retirement approaches. This flexible approach emphasizes re-evaluating asset allocations over time, adapting to market changes and individual circumstances.
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Minus Your Age Rule
- Use the "minus your age" rule to guide stock-to-bond allocation.
- Adjust the constant (100, 120, 130, or 140) based on your risk tolerance.
Age in Bonds
- The "100 minus your age" rule, allocating your age in bonds, was common in the past.
- This conservative approach reflected shorter lifespans and market skepticism after the Great Depression.
120 Minus Age Rule
- The "120 minus your age" rule became popular later, increasing stock allocation.
- Jack Bogle recommended both the 100 and 120 versions, emphasizing age's influence.
