Portfolio Allocation Calculator

Asset allocation is how you divide your investments across different asset classes like stocks, bonds, real estate, and cash. It's one of the most important factors in determining your portfolio's risk and return. Studies show that asset allocation accounts for over 90% of a portfolio's return variability over time.

As you age, your investment horizon shortens and your ability to recover from market downturns decreases. A common guideline is to reduce stock exposure as you get older. This calculator adjusts by shifting 0.5% from stocks to bonds for each year above age 30, helping to reduce portfolio volatility as you approach retirement.

REITs (Real Estate Investment Trusts) are companies that own, operate, or finance income-producing real estate. They offer diversification benefits because they often move differently from stocks and bonds. REITs typically provide regular income through dividends and can serve as a partial inflation hedge. A 5-10% allocation is common for most investors.

Rebalancing means adjusting your portfolio back to its target allocation. Most advisors recommend rebalancing annually or when any asset class drifts more than 5% from its target. Over-rebalancing can increase transaction costs and tax events, while under-rebalancing can lead to unintended risk exposure. The right frequency depends on your investment horizon and market conditions.

Conservative allocations (heavy in bonds and cash) prioritize capital preservation with lower expected returns and less volatility. Moderate allocations balance growth and stability with a mix of stocks and bonds. Aggressive allocations (heavy in stocks) aim for maximum growth but come with higher volatility and larger potential drawdowns. Your choice should reflect your risk tolerance, time horizon, and financial goals.