The Rule of 110 suggests subtracting your age from 110 to determine your stock allocation percentage.

For a 40-year-old: 110 - 40 = 70% stocks, 30% bonds.

This rule automatically reduces risk as you age.

Modern variations use 115 or 120 for longer lifespans and lower bond yields.

Adjust based on risk tolerance: conservative subtract 10%, aggressive add 10%.

Rebalance annually or when any asset class deviates 5-10% from target allocation.

Studies show annual rebalancing captures 95% of benefits with minimal trading costs.

Threshold rebalancing (5% deviation) averages 1-2 rebalances per year.

Over-rebalancing (monthly/quarterly) increases costs without improving returns.

Tax-advantaged accounts allow free rebalancing; taxable accounts should consider tax implications.

Age 30: 80% stocks, 15% bonds, 5% cash.

Age 40: 70% stocks, 25% bonds, 5% cash.

Age 50: 60% stocks, 35% bonds, 5% cash.

Age 60: 50% stocks, 40% bonds, 10% cash.

Age 70+: 30-40% stocks, 50% bonds, 10-20% cash.

Adjust for personal factors: higher income stability allows more stocks, pension coverage reduces bond needs, large emergency fund reduces cash allocation.

Alternative investments (REITs, commodities, crypto) can comprise 5-20% for diversification.

REITs: 5-10% provides real estate exposure and inflation protection.

Commodities: 5% gold/precious metals as portfolio insurance.

Crypto: 1-5% maximum due to extreme volatility.

Only add alternatives after establishing core stock/bond allocation and with 5+ year time horizon.

Strategic allocation is your long-term target (e.g., 60/40 stocks/bonds) based on goals and risk tolerance, rebalanced annually.

Tactical allocation involves temporary shifts (±10%) based on market conditions, requiring active management.

Studies show strategic allocation determines 90% of returns, while tactical adds complexity with minimal benefit for most investors.

Conservative (capital preservation): 30% stocks, 60% bonds, 10% cash.

Moderate (balanced growth): 60% stocks, 35% bonds, 5% cash.

Aggressive (maximum growth): 80-90% stocks, 10-20% bonds, 0-5% cash.

Risk tolerance depends on: time horizon (longer allows more risk), income stability, emergency savings, emotional comfort with volatility, and ability to recover from losses.