Asset Allocation Calculator
Find the recommended asset allocation based on age, risk tolerance, and goals.
What this calculator does
This calculator suggests a starting allocation across equities, bonds, and cash based on your age and risk tolerance. It applies the widely used 110 minus age rule to set the equity share, adjusts it by 10 percentage points for a conservative or aggressive stance, and splits the remainder between bonds and cash.
Age drives the answer because of time, not caution. Equities have delivered the highest long-run returns and the deepest falls, so what matters is whether you have enough years to sit through a bad decade. At 30 you do; at 68 with drawdown already started, you may not.
When to use it
Use it when opening a Stocks and Shares ISA or setting up a SIPP and you need a defensible starting point, or when a birthday and a strong market run leave you wondering whether your current mix still fits. It is a sanity check rather than a prescription — an anchor against which to judge what you actually hold.
It is also the necessary first step before rebalancing, since you cannot rebalance without a target. Where it does not apply is any goal with a hard deadline. Money needed for a house deposit in two years should not be allocated by age at all — that is a savings question, not an investment one.
Understanding the inputs
Age is the main driver, standing in for your investment horizon. If you expect to work well past 66 or intend to leave a portfolio to beneficiaries, your effective horizon is longer than your age implies and a higher equity share is defensible.
Risk tolerance moves equity by 10 points either way. Answer from your behaviour in past falls rather than how you feel during a rising market. The output splits the remainder between bonds and cash. Cash of 5 to 10 percent is typical, covering near-term needs and allowing you to buy in a downturn without selling anything — hold it somewhere FSCS-protected.
How is this calculated?
The blended expected return is the weighted average of each asset class's expected return, weighted by its share of the portfolio. Weights are normalised, so a split that does not total 100 per cent is scaled rather than rejected. Each class's contribution shows how much of the overall return it is responsible for.
A worked example
Take a 40-year-old with moderate risk tolerance. The rule gives 110 minus 40, or 70 percent equities, leaving 30 percent split between bonds and cash — say 22 percent bonds and 8 percent cash. On a £150,000 portfolio that is £105,000 in equities, £33,000 in bonds, and £12,000 in cash.
The same person choosing an aggressive stance moves to 80 percent equities, or £120,000. In a 30 percent equity fall, the moderate portfolio drops about £31,500 while the aggressive one drops £36,000 — a £4,500 difference that sounds manageable in the abstract and rarely feels that way at the time. That gap is the whole substance of the risk tolerance question.
Limitations and assumptions
This is a rule of thumb, not personalised advice. It knows nothing about your income stability, other assets, whether you have a defined benefit pension, how much debt you carry, or what the money is for. Two 45-year-olds with identical portfolios can warrant very different allocations.
It models three broad buckets only and cannot address UK versus global equity, credit quality or duration within bonds, or alternatives. Past asset class returns do not predict future ones, and no allocation prevents losses — cautious portfolios still fell in 2022 when equities and gilts declined together. Treat the output as a starting point, not regulated financial advice.
Common Questions
- What is the 110 minus age rule?
- A shorthand for how much of a portfolio belongs in equities: subtract your age from 110. At 40 that suggests 70 percent equities, with the remaining 30 percent in bonds and cash. The older version used 100, but longer lifespans and longer retirements have pushed the convention upward.
- Is a rule of thumb good enough?
- As a starting point, yes. It captures the thing that matters most — that your equity share should fall as your investing horizon shortens. What it ignores is everything personal: your other income, job security, existing wealth, and how you actually behaved the last time markets fell 30 percent.
- How much does risk tolerance change the answer?
- This calculator shifts the equity allocation by 10 percentage points either way — conservative subtracts 10, aggressive adds 10. At 40 that spans 60 to 80 percent equities. The range covers most reasonable positions; going outside it should follow from a specific circumstance, not a recent market view.
- Where should bonds sit for tax purposes?
- Inside an ISA or pension where possible. Interest from bond funds is taxed as savings income at your marginal rate outside a wrapper, whereas dividends have their own allowance and lower rates. Individual gilts are a partial exception — they are exempt from capital gains tax, which makes low-coupon gilts efficient even in a general account.
- Why does allocation matter more than fund picking?
- Because the split between equities and bonds explains the large majority of a portfolio's return variation over time, far more than which particular funds you chose. Getting the allocation roughly right and leaving it alone beats getting the fund selection precisely right inside the wrong allocation.
- What is my true risk tolerance?
- It is what you did in March 2020 or in 2008, not what you tick on a questionnaire. If you sold during a fall, your real tolerance is lower than you believe, and a smaller equity allocation you can actually hold beats a larger one you abandon at the bottom.
- Does the rule work for retirees?
- Partly. At 65 it suggests 45 percent equities, reasonable for someone with 25 years ahead. But a retiree whose State Pension and defined benefit income already cover essential spending can carry more equity risk than the rule implies, because the spending that matters is not exposed to markets at all.
- How much should be in UK versus global equities?
- The UK is roughly 4 percent of global market capitalisation, yet many UK investors hold 20 to 30 percent in domestic shares. Some home bias is defensible for currency reasons, but a heavy UK weighting concentrates you in financials, energy, and mining. This calculator does not split within equities.
- What about gold, crypto, or property?
- They sit outside this three-bucket model. If you hold them, count them against the equity slice rather than as an addition, since they carry equity-like or greater volatility. Most advisers cap speculative holdings at around 5 percent, sized so a total loss would not change the plan. Your own home is not part of the portfolio.