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Monday, March 20, 2023

What is the 100-age rule of asset allocation?

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Once you have generated savings and have begun to invest, the next question is, what should be your portfolio split? Proper asset allocation is based on the investor’s risk profile. As one grows older, their risk appetite reduces and their investments should reflect their appetite for the protection of their interests. The “100 minus age” rule helps people understand the ideal asset allocation based on the investor’s age. Since equity is the riskiest asset class, using the 100 minus age rule, investors can determine the percentage of equity in their portfolio. If an investor is 25 years old, their portfolio should consist of 100-25, or 75 percent equity and the rest should be debt instruments.

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