Asset Allocation Models and Planning
Purposeful asset allocation is a key to long-term success.
Why asset allocation matters
Balance risk
Asset allocation spreads your money among different types of investments (stocks, bonds, and short-term securities) so that you can manage volatility and growth potential over time. Investing in a variety of securities with your asset class mix provides further diversification.
Provides a foundation
Your asset allocation provides the framework for your investment strategy, which you can use to further diversify your holdings.
Asset allocation funds offer a diverse portfolio with one investment.
Rebalance to help mitigate risk
Periodically rebalancing a diversified portfolio involves shifting money on a regular basis from assets that have performed well to those that have been lagging. This strategy seeks to:
Reduce portfolio volatility
Help minimize emotional aspects of investing
Prevent risk exposure from increasing when markets are performing well
Offer opportunity to take advantage of stock market declines with lower investing prices
Consider retirement asset allocation models by age
20s
| ◼︎ | Equity | 90-100% |
| ◼︎ | Fixed Income | 0-10% |
30s
| ◼︎ | Equity | 90-100% |
| ◼︎ | Fixed Income | 0-10% |
40s
| ◼︎ | Equity | 80-100% |
| ◼︎ | Fixed Income | 0-20% |
50s
| ◼︎ | Equity | 65-85% |
| ◼︎ | Fixed Income | 15-35% |
60s
| ◼︎ | Equity | 45-65% |
| ◼︎ | Fixed Income | 30-50% |
| ◼︎ | Short Term | 0-10% |
70s & Older
| ◼︎ | Equity | 30-50% |
| ◼︎ | Fixed Income | 40-60% |
| ◼︎ | Short Term | 0-20% |
These allocations are age-based only and do not take risk tolerance into account. Our asset allocation models are designed to meet the needs of a hypothetical investor with an assumed retirement age of 65 and a withdrawal horizon of 30 years.
The model asset allocations are based upon analysis that seeks to balance long-term return potential with anticipated short-term volatility. The model reflects our view of appropriate levels of tradeoff between potential return and short-term volatility for investors of certain ages or timeframes. The longer the time frame for investing, the higher the allocation is to stocks (and the higher the volatility) versus bonds or cash.
Limitations
While the asset allocation models have been designed with reasonable assumptions and methods, the tool provides models based on the needs of hypothetical investors only and has certain limitations:
- The models do not take into account individual circumstances or preferences, and the model displayed for your investment goal and/or age may not align with your accumulation timeframe, withdrawal horizon, or view of the appropriate levels of tradeoff between potential return and short-term volatility.
- Investing consistent with a model allocation does not protect against losses or guarantee future results.
Please be sure to take other assets, income and investments into consideration in reviewing results that do not incorporate that information. Other T. Rowe Price educational tools or advice services use different assumptions and methods and may yield different outcomes.
Get a diversified portfolio with one investment
Asset Allocation Funds
Achieve a complete investment portfolio in a single investment. Professionally managed so your portfolio stays on track with automatic rebalancing, regardless of market activity.
ActivePlus Portfolios
A convenient way to invest based on your risk tolerance and time horizon. Complete a short questionnaire, and we’ll recommend a diversified model portfolio designed and managed by our experts.
Target Date Funds
Choose from Retirement Funds and Target Funds, both with allocations to stocks and bonds that change over time depending upon your retirement time line.
If you are interested in selecting and managing your own investments, you can use the Mutual Fund Guide to build your own portfolio.
Asset allocation cannot assure a profit or protect against loss in a declining market.
This material has been prepared by T. Rowe Price for general and educational purposes only. This material does not provide fiduciary recommendations concerning investments or investment management. T. Rowe Price, its affiliates, and its associates do not provide legal or tax advice. Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or professional tax advisor regarding any legal or tax issues raised in this material.
The principal value of the Retirement Funds and Target Funds (collectively the "funds") is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The funds' allocations among a broad range of underlying T. Rowe Price stock and bond funds will (with the exception of the Retirement Balanced Fund change over time. The funds (other than the Retirement Balanced Fund emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons.
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