Stock / bond split
How much should I have in bonds?
The honest answer is a question: how large a temporary drop can you sit through without selling? Everything else is a way of estimating that.
The rules of thumb, and what they assume
| Age in bonds | 60 years old → 60% bonds. Conservative; assumes you get more risk-averse steadily with age. |
| 120 minus age in stocks | 60 years old → 60% stocks. The common modern version. |
| Target-date glide path | ~90% stocks decades out, gliding to ~30–50% stocks at retirement. Built to be hands-off. |
What actually drives the number
- Time horizon. Money you need in 3 years shouldn’t be mostly in stocks regardless of your age — there isn’t time to recover from a bad one. Money you won’t touch for 20+ years can ride out almost anything.
- Risk capacity vs risk tolerance. Capacity is whether a big loss would actually derail your plans. Tolerance is whether you’d panic-sell. The lower of the two wins.
- What a crash looks like. An all-stock portfolio has fallen ~50% peak-to-trough more than once and taken years to recover. If you know you’d sell into that, you need more bonds — a mix you hold beats a mix you abandon.
Get a number from your situation
Portfolio Lab’s planner takes your capital, time horizon, and how much of a drop you could hold through, and outputs a stock/bond split with the specific funds — then backtests it against a century of data and projects it forward.
Plan an allocation →Common questions
Is 'age in bonds' still a good rule?
It's a starting point, not a law. 'Age in bonds' is fairly conservative; '120 minus age in stocks' is the more common modern version; target-date funds sit somewhere between. The right number depends on your time horizon and how you actually behave in a crash, not just your age.
Do bonds increase my return?
Usually not — over long periods stocks return more. Bonds are there to make the ride survivable: shallower drawdowns, and something to rebalance from when stocks fall. A portfolio you can hold through a 40% drop beats a better one you bail out of.
Aren't bonds a bad deal right now?
The 1982–2020 bond bull market — falling yields lifting bond prices — can't repeat from today's starting yields, so don't expect bonds to contribute much return. Their job now is diversification and ballast, and for that they still work.
Educational, not advice.