Risk Asset Allocation Calculator

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Tell us about yourself (Risk Asset Allocation)

Tip: Risk asset allocation determines how much risk your investments can take. In general, being more conservative will reduce portfolio volatility, but it will also decrease potential returns.

Please go over this brief questionnaire to determine your risk asset allocation. The questions are designed to comprehend your investment time horizon and evaluate your risk tolerance.

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The length of time you plan to invest before you begin withdraws:

(e.g. the years to retirement. If you’ve already begun withdraws, please input ‘0’) Years
Your answers to the questionnaire indicates you are a investor with the risk asset allocation of
Based on your risk asset allocation, the general asset allocation of your portfolio would be as follows:
  • No more than % in risk assets such as stock, real estate and/or commodities
  • At least % in bonds or fixed income asset

Please note that the above allocation is only a suggestion. It is advisable to consult with a financial professional to tailor it to your specific situation.

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Risk Asset Allocation Calculator Instructions

The calculator helps you to decide how much percentage allocation to risk assets (stocks, REITs, commodities) you should have for your investments. Depending on your answers with respect to your overall personal finance or just to a particular investment account (such as a 401(k) plan account), the asset allocation could be for your overall personal investment allocation or just for that specific account.

The calculator allows you to take a quick way to decide your risk allocation: using 100-age rule suggested by John Bogle or go through questionnaire. The questionnaire asks you questions in the following two categories:

  1. Investment horizon: Questions related on how sure you need the money.
  2. Risk tolerance: Questions to assess how much risk tolerance you can take related to this investment account or in your overall personal finance.

Results: Based on the information you provide, our calculator will a percentage allocation to stocks and other risk assets.

Risk Asset Allocation In Retirement Plans

Investing in stocks, bonds, and other assets represented by funds inherently involves some volatility, with the most apparent aspect being the fluctuation in the price or value of your funds within a 401(k) or brokerage account. Additionally, depending on your investment time horizon, this fluctuation or volatility can pose a tangible risk, especially if, for instance, you require funds from your stock investments during a bear market. This risk persists even for individuals with a high tolerance for risk.

Risk asset allocation involves assigning a percentage of your portfolio to stocks and other risk-bearing assets like REITs (Real Estate Investment Trusts), commodities, and high-risk fixed-income options such as high-yield (junk) bonds, emerging market bonds, and long-term bonds. This allocation can be specific to a (401(k)) account or applicable to your overall personal finance. Various methods have been developed to assist you in making informed decisions regarding such allocations.

Age based

John Bogle proposed a straightforward rule of thumb for allocating bonds based on age. According to this suggestion, one can determine the bond allocation by using their age as a percentage. For instance, if an individual is 45 years old, the recommended bond allocation would be 45%. Consequently, the stock or risk asset allocation would be calculated as 100 minus the age, resulting in 55%. In simpler terms, the suggested formula for determining risk (stock) asset allocation percentage is 100 minus the individual’s age.

While the age-based rule of thumb simplifies overall asset allocation, it may not be suitable for specific accounts with unique needs. For instance, if you anticipate not needing your 401(k) funds for the next 30 years or more, the risk allocation for this account might lean towards 80-100% in stocks, even if you are 60 years old.

Another limitation of this simple age-based rule is its oversight of investors’ psychological risk tolerance levels. Individuals differ in their approach, with some checking their 401(k) daily while others may ignore it for extended periods. Additionally, varying attitudes towards viewing it as speculation or desiring stability add complexity. Therefore, a more robust tool is necessary to accommodate these individual nuances.

Investment time horizon and risk tolerance

A more sophisticated risk allocation tool involves a comprehensive understanding of both the investment time horizon and the investor’s risk tolerance, which can apply to specific accounts or overall personal investments. Our calculator above guides you through a series of questions in these two aspects, utilizing the answers to derive a risk allocation either for the specific account or for the overall investments.

For further education and assistance in deciding risk asset allocations, you can refer to the following resources.