Investing Retirement Planning How Much of Your Money Should Be in Stocks vs. Bonds By Dana Anspach Dana Anspach Twitter Dana Anspach is a Certified Financial Planner and an expert on investing and retirement planning. She is the founder and CEO of Sensible Money, a fee-only financial planning and investment firm. learn about our editorial policies Updated on October 21, 2021 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board In This Article View All In This Article Ultra Aggressive Moderately Aggressive Moderate Growth Conservative Retirement Considerations Frequently Asked Questions (FAQs) Photo: Delmaine Donson / Getty Images Building a portfolio? One of the first decisions to make is choosing how much of your money you want to invest in stocks vs. bonds. The right answer depends on many things, including your experience level, age, and the investment philosophy you plan on using. Most people will benefit from a long-term investing strategy. When adopting a long-term viewpoint, you can use something called strategic asset allocation. This investment strategy determines what percentage of your investments should be in stocks vs. bonds. With this approach, you choose your investment mix based on historical measures of the rates of return and levels of volatility of different asset classes. ("Volatility" is risk as measured by short-term ups and downs.) For example, in the past, stocks have had a higher rate of return than bonds over the long term. But, stocks have had more volatility in the short term. The four allocation samples below are based on a strategic approach. This means that you are looking at the outcome over 15 years or more. Note When investing, you don't measure success by looking at returns daily, weekly, monthly, or even yearly. Instead, you look at the results over periods of many years. Ultra Aggressive If your goal is to see returns of 9% or more, you should allocate 100% of your portfolio to stocks. You must expect that at some point with this approach you will see a quarter where your holdings lose as much as 30%. You may even see an entire year where your stocks are down as much as 60%. That means for every $10,000 invested, the value could drop to $4,000. Over many, many years, the down years (which happens about 30% of the time) should be offset by the positive years (which happens about 68% of the time). Moderately Aggressive If you want to target a long-term rate of return of 8% or more, move 80% of your portfolio to stocks and 20% to cash and bonds. With this approach, expect that at some point you could have a single quarter where your portfolio drops 20% in value. You may even have an entire year where it drops by as much as 40%. But the idea is that it will recover (and then some) over the long term. It is best to rebalance this mix about once a year. Moderate Growth If you want to target a long-term rate of return of 7% or more, keep 60% of your portfolio in stocks and 40% in cash and bonds. With this mix, a single quarter or year could see a 20% drop in value. It is best to rebalance about once a year. Conservative If you want to preserve your capital rather than earn higher returns, then invest no more than 50% in stocks. You may still have volatility with this approach and could see a quarter or a year where your portfolio falls by 10%. If you want to avoid any risk, consider sticking with safer bets like money markets, CDs, and bonds. Retirement Considerations The models above provide a guide for you if you haven't retired yet. They aim to give high returns while minimizing risk. That may not suit you when you shift to retirement. Then, you will need to take regular withdrawals from your savings and investments. At that phase of life, your goal changes from growing returns to securing steady income. A portfolio built to boost returns may not be as effective at generating consistent income due to its volatility. If you are near retirement, check out other approaches. For example, you might add up the amount you need to withdraw over the next five to 10 years. Then, you might decide which portion of your holdings to put in bonds, with the rest held in stocks. With that strategy, your needs are safely invested but you allow some room for growth. However, the part invested in stocks is still subject to volatility, which you should watch carefully. Frequently Asked Questions (FAQs) How do you determine the percentages of stocks and bonds in your portfolio? Using strategic asset allocation, you can determine how much to invest in stocks and bonds related to how comfortable you are with the risk involved. For example, if you have a higher tolerance, you can invest 70% in stocks and 30% in bonds, but you could use a 60-40 plan if you have a lower tolerance. You can use the determined allocation for several years to play the long-term game of reaching a financial goal. Are bonds safe if the stock market crashes? It's a common misconception that bonds are entirely safe from the volatility of the stock market. They are subject to deviation, but they have a narrower range of deviation over time than stocks. Trends reveal that they typically don't lose as much value as stocks do when the market falls. This makes them safer options than stocks, but they do have their own level of risk. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. RBC Wealth Management. "Strategic Asset Allocation," Pages 1-2. TD Ameritrade. "Stocks and Bonds: Risk Versus Return 1970-2018," Page 1. Library of Congress. "The Stock Market Level in Historical Perspective," Pages 4-7. Investor.gov. "Beginners' Guide to Asset Allocation, Diversification, and Rebalancing," NYU. "Historical Returns for the US."