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The "100 Minus Age" Rule for Asset Allocation
A traditional guideline for determining your equity exposure in an investment portfolio.

What is the "100 Minus Age" Rule?

The "100 Minus Age" rule is a simple, age-based guideline for asset allocation. It suggests that the percentage of your investment portfolio dedicated to equities (stocks or stock mutual funds) should be 100 minus your current age. The remaining portion is typically allocated to less risky assets like debt instruments (bonds, fixed deposits).

The underlying principle is that younger investors can afford to take on more risk (higher equity exposure) for potentially higher returns, as they have a longer time horizon to recover from market downturns. As one gets older, the portfolio should gradually shift towards more conservative assets to protect capital.

The Formula

Percentage of Portfolio in Equities = 100 - Your Current Age

Percentage of Portfolio in Debt = Your Current Age

Example

If you are 30 years old:

  • Equity Allocation: 100 - 30 = 70%
  • Debt Allocation: 30%

If you are 60 years old:

  • Equity Allocation: 100 - 60 = 40%
  • Debt Allocation: 60%

Modern Variations (110/120 Minus Age)

Due to increasing life expectancies and potentially lower returns from traditional debt instruments, many financial advisors now suggest more aggressive variations of this rule, such as:

  • 110 Minus Age: For a slightly higher equity exposure. (e.g., a 30-year-old would have 110 - 30 = 80% in equities).
  • 120 Minus Age: For those comfortable with even more risk or who have a very long investment horizon. (e.g., a 30-year-old would have 120 - 30 = 90% in equities).

Choosing which variation (or none at all) depends heavily on individual circumstances.

Benefits

  • Simplicity: Easy to understand and apply as a basic guideline.
  • Age-Adjusted Risk: Systematically reduces risk exposure as one approaches retirement.
  • Starting Point: Provides a quantifiable starting point for asset allocation discussions.

Limitations & Considerations

  • Oversimplification: Doesn't account for individual risk tolerance, financial goals, income stability, dependents, or market conditions.
  • Not One-Size-Fits-All: A wealthy 60-year-old with diverse income streams might tolerate more equity risk than a 30-year-old with high debt and dependents.
  • Changing Lifespans: The original "100 minus age" may be too conservative for today's longer lifespans and retirement periods.
  • Market Dynamics: Doesn't consider current market valuations or economic outlooks.