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Asset Allocation Formula:
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Asset Allocation refers to the distribution of investments across different asset classes within an investment portfolio. It is a fundamental principle of portfolio management that helps balance risk and return based on an individual's investment goals and risk tolerance.
The calculator uses the Asset Allocation formula:
Where:
Explanation: This simple rule suggests that the percentage of your portfolio allocated to growth assets (like stocks) should be 100 minus your age, with the remainder allocated to more conservative investments.
Details: Proper asset allocation is crucial for managing investment risk and achieving long-term financial goals. It helps investors maintain an appropriate balance between growth potential and capital preservation based on their age and risk tolerance.
Tips: Enter your current age in years. The calculator will determine the suggested percentage allocation to growth assets in your investment portfolio.
Q1: Is the 100-Age rule appropriate for everyone?
A: While it's a good starting point, individual circumstances, risk tolerance, and financial goals should be considered. Some investors may need a more customized approach.
Q2: What types of investments are considered growth assets?
A: Growth assets typically include stocks, equity funds, real estate investment trusts (REITs), and other investments with higher growth potential but also higher volatility.
Q3: How often should I review my asset allocation?
A: It's recommended to review your asset allocation annually or whenever your financial situation, goals, or risk tolerance changes significantly.
Q4: Does this formula work for retirement planning?
A: The 100-Age rule can be a starting point for retirement planning, but more comprehensive retirement calculators that consider income, expenses, and other factors are recommended for detailed planning.
Q5: What about the remaining percentage?
A: The remaining percentage (your age) is typically allocated to more conservative investments like bonds, fixed income securities, and cash equivalents to provide stability and income.