I found a lot of information about how to allocate between stocks and bonds based on age, but I cannot find much about the proper allocation between domestic/international assets, large cap/small cap, etc. Where is the best place to find this?


1 Answer 1


Look into the asset allocations of lifecycle funds offered by a company like Vanguard. This page allows you to select your current age and find a fund based on that. You could pick a fund, like the Target Retirement 2055 Fund (ages 21-25), and examine its allocation in the Portfolio & Management tab. For this fund, the breakdown is:

89.87% - Stocks
9.99%  - Bonds
0.14%  - Short-term reserves

Then, look at the allocation of the underlying funds that comprise the lifecycle fund, in the same tab.

63.1% - Vanguard Total Stock Market Index Fund Investor Shares
26.9% - Vanguard Total International Stock Index Fund Investor Shares
10.0% - Vanguard Total Bond Market II Index Fund Investor Shares*

Look at each of those funds and see what asset allocation they use, and that should give you a rough idea for an age-based allocation. For example, the Total Stock Market Index Fund page has a sector breakdown, so if you wanted to get very fine-grained with your allocation, you could. (You're probably much better off investing in the index fund, low-cost ETFs, or the lifecycle fund itself, however; it'll be much cheaper).

Doing this for several lifecycle funds should be a good start. Keep in mind, however, that these funds are rebalanced as the target date approaches, so if you're following the allocation of some particular funds, you'll have to rebalance as well. If you really want an age-based allocation that you don't have to think about, invest in a lifecycle fund directly. You'll probably pay a lower expense ratio than if you invested in a whole slew of funds directory, and it's less work for someone who isn't comfortable managing their portfolio themselves. Furthermore, with Vanguard, the expense ratios are already fairly low.

This is only one example of an allocation, however; your tolerance of risk, age, etc. may affect what allocation you're willing to accept.

Full disclosure: Part of my Roth IRA is invested in the Target 2055 fund I used as an example above, and another part uses a similar rebalancing strategy to the one I used above, but with Admiral Share funds, which have higher minimum investments but lower expense ratios.


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