Asset Allocation by Age: Quick Guide
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| Age | Stocks | Bonds | Suggested ETF |
|---|---|---|---|
| 20-35 | 90-100% | 0-10% | XEQT / VEQT |
| 35-45 | 80-90% | 10-20% | XGRO / VGRO |
| 45-55 | 60-80% | 20-40% | XGRO / XBAL |
| 55-65 | 40-60% | 40-60% | XBAL / VBAL |
| 65+ | 30-50% | 50-70% | XCNS / VCNS |
These are guidelines, not rules. Your risk tolerance and timeline matter more than age alone.
Rules of Thumb
The “100 Minus Age” Rule
Stocks = 100 – Your Age
| Age | Stocks | Bonds |
|---|---|---|
| 25 | 75% | 25% |
| 40 | 60% | 40% |
| 55 | 45% | 55% |
| 70 | 30% | 70% |
Problem: This rule was created when lifespans were shorter. It’s too conservative for modern investors.
The “110 Minus Age” Rule (Modern)
Stocks = 110 – Your Age
| Age | Stocks | Bonds |
|---|---|---|
| 25 | 85% | 15% |
| 40 | 70% | 30% |
| 55 | 55% | 45% |
| 70 | 40% | 60% |
The “120 Minus Age” Rule (Aggressive)
Stocks = 120 – Your Age
| Age | Stocks | Bonds |
|---|---|---|
| 25 | 95% | 5% |
| 40 | 80% | 20% |
| 55 | 65% | 35% |
| 70 | 50% | 50% |
Best for: Those with secure income (pension), high risk tolerance, or long retirement horizons.
Why Allocation Matters
Stocks vs Bonds Risk/Return
| Asset | Avg Return | Worst Year | Best Year | Volatility |
|---|---|---|---|---|
| Stocks | 9-10% | -40% | +50% | High |
| Bonds | 4-5% | -15% | +20% | Low |
| 60/40 | 7-8% | -22% | +30% | Medium |
30-Year Growth Comparison
$100,000 invested over 30 years:
| Allocation | Final Value | Worst 1-Year Loss |
|---|---|---|
| 100% Stocks | $1,745,000 | -37% |
| 80/20 | $1,380,000 | -29% |
| 60/40 | $1,075,000 | -22% |
| 40/60 | $820,000 | -14% |
100% stocks wins long-term but requires tolerating significant drops.
Risk Factors Beyond Age
Consider More Stocks If:
- Stable job or multiple income sources
- Long time horizon (10+ years)
- High risk tolerance
- Pension or other guaranteed income
- Emergency fund is solid
- No major near-term expenses
Consider More Bonds If:
- Approaching retirement
- Single income household
- Low risk tolerance
- Large upcoming expense (home, education)
- Volatile job/industry
- Would sell in a panic during crashes
Model Portfolios by Life Stage
Early Career (20-35)
| Asset | Allocation |
|---|---|
| Stocks | 90-100% |
| Bonds | 0-10% |
Why: Decades to recover from downturns. Focus on growth.
ETF option: XEQT, VEQT. Our best all-in-one ETFs in Canada guide compares the main one-fund choices.
Mid-Career (35-50)
| Asset | Allocation |
|---|---|
| Stocks | 70-90% |
| Bonds | 10-30% |
Why: Still significant time, but begin considering stability.
ETF option: XGRO, VGRO
Pre-Retirement (50-65)
| Asset | Allocation |
|---|---|
| Stocks | 50-70% |
| Bonds | 30-50% |
Why: Need growth but can’t afford a 40% drop right before retirement.
ETF option: XBAL, VBAL
Early Retirement (65-75)
| Asset | Allocation |
|---|---|
| Stocks | 40-60% |
| Bonds | 40-60% |
Why: Balance growth (need money for 20-30 years) with stability (drawing income).
ETF option: XBAL, XCNS
Late Retirement (75+)
| Asset | Allocation |
|---|---|
| Stocks | 30-50% |
| Bonds | 50-70% |
Why: Capital preservation becomes priority. Still need some growth for longevity.
ETF option: XCNS, VCNS
Implementing Your Allocation
Option 1: All-in-One ETFs
Simplest approach — one fund, automatic rebalancing. If you are debating whether that simplicity is worth paying for compared with a managed service, see robo-advisor vs ETF portfolio.
| ETF | Stock/Bond Split |
|---|---|
| XEQT / VEQT | 100/0 |
| XGRO / VGRO | 80/20 |
| XBAL / VBAL | 60/40 |
| XCNS / VCNS | 40/60 |
Option 2: DIY Portfolio
Build your own with separate ETFs:
| Asset | ETF | MER |
|---|---|---|
| Canadian stocks | XIC | 0.06% |
| US stocks | XUU | 0.07% |
| International | XEF | 0.22% |
| Bonds | ZAG | 0.09% |
This offers lower fees but requires manual rebalancing. You can compare those fund costs with our MER calculator.
When to Rebalance
Rebalancing = selling high, buying low to maintain target allocation.
Time-Based
Rebalance annually (e.g., birthday, January 1)
Threshold-Based
Rebalance when allocation drifts 5%+ from target:
- Target: 80/20
- Current: 88/12 → Rebalance
With New Contributions
Direct new money to underweight asset class
Common Mistakes
| Mistake | Problem | Solution |
|---|---|---|
| Too conservative young | Miss growth | Use 100% equity until 45-50 |
| Too aggressive old | Sequence of returns risk | Add bonds 10-15 years before retirement |
| Never rebalancing | Drift from target | Set annual reminder |
| Market timing | Selling low, buying high | Stick to plan |
| Ignoring all accounts | Suboptimal allocation | View portfolio holistically |
Should You Ever Be 100% Stocks?
Arguments for 100% stocks:
- Highest long-term returns
- Bonds yield little after inflation
- Long time horizon handles volatility
Arguments against:
- Harder to stay invested during crashes
- Sequence of returns risk near retirement
- Some bonds reduce volatility significantly
Compromise: 100% stocks until age 45-50, then gradually add bonds.