What This Asset Allocation Calculator Does
Asset allocation divides a portfolio across asset categories. This page demonstrates three fixed stock/bond/cash mixes and the effect of a constant assumed return. Its four-question score is a teaching device: it does not establish an ideal allocation or evaluate your ability to bear losses.
Inspect the Rule, Then Compare Scenarios
- Answer the horizon, drawdown-reaction, goal and knowledge questions. Each option adds 1, 2 or 3 points with equal weight.
- Scores 4–6 select 20% stocks, 50% bonds and 30% cash; 7–9 select 60/30/10; 10–12 select 80/15/5. The labels Conservative, Moderate and Aggressive describe relative equity exposure within these examples.
- Use the comparison buttons to inspect another preset. The selection does not trade or change an account.
- Enter an initial amount and three annual return assumptions. The defaults of 8%, 4% and 2% are illustrative; they are not measured historical averages or current product yields. Try zero or negative values as well as positive values.
The equation is balance at year t = initial amount × (1 + weighted return)^t, where weighted return is the sum of each allocation weight times its assumed return. The same weights are applied each year, equivalent to cost-free annual rebalancing. No deposits, withdrawals or taxes are included.
The Asset Labels Hide Important Differences
Stocks
Ownership exposure can lose value. A diversified global fund and a concentrated single-stock position have different risks despite both being equities.
Bonds
Duration, credit quality and currency matter. Bond prices can fall as yields rise, and a bond allocation does not guarantee protection when stocks decline.
Cash
Deposits, Treasury bills and money market funds have different access and protection rules. Money market funds are not FDIC insured. Inflation can reduce purchasing power.
A Smooth Line Is Not a Risk Estimate
The chart has no random returns, covariance, drawdowns or confidence interval. It cannot show how likely an amount is or how losses near a withdrawal date affect a plan. Diversification can reduce concentration risk but does not guarantee a gain or prevent market-wide losses.
The quiz does not ask about income, emergency reserves, debt, dependents, taxes or existing holdings. A high knowledge score can offset a short horizon in its simple sum; that is a limitation of the exercise, not evidence that the resulting preset suits that person. Evaluate those omitted constraints before selecting an actual target.
Use Real Constraints to Set a Target
Start with when money will be needed and how much loss can be absorbed without changing essential spending. Identify concentrations inside each asset class. Compare the actual holdings, fees and glide path of any target-date fund; a target year alone does not specify its allocation or guarantee retirement income.
A rebalancing policy can specify a review schedule or drift threshold. Neither annual review nor a fixed percentage-point trigger is universally best; transaction costs, taxes and cash flows affect implementation. This calculator maintains its hypothetical weights automatically and does not model those costs.
Primary references: SEC Investor.gov on allocation and diversification and money market fund risks.