TLDR:
- The “100-minus-age” rule is a widely recognized rule of thumb in personal finance used to establish asset allocation.
- This rule recommends investing the result of subtracting your age from 100 in equities, with the remaining portion allocated to debt instruments.
The “100-minus-age” rule is a widely recognized rule of thumb in personal finance used to establish asset allocation. It recommends investing the result of subtracting your age from 100 in equities, with the remaining portion allocated to debt instruments. The rule appears straightforward and proves useful for novice investors who may find the intricacies of asset allocation overwhelming. However, it does have limitations. The rule does not fit all investor objectives, as risk tolerance varies across individuals. Additionally, the rule does not consider market dynamics and income requirements, and it overlooks financial commitments such as mortgages and student loans. While the rule can serve as an initial reference point, it is important to seek guidance from a financial advisor to develop a personalized asset allocation strategy that takes into account specific financial circumstances and goals.