How to Pick Your Asset Allocation Based on Time Horizon

Choose the right mix of stocks and bonds for your investment timeline using simple rules and age-based frameworks.

1. Define your actual time horizon. Count the years until you need to withdraw this money. Retirement funds have a 20-40 year horizon for most people. A house down payment might be 3-5 years. Emergency funds need to stay liquid, so they don't belong in this allocation at all.
2. Use the 120-minus-age rule as your starting point. Subtract your age from 120 to get your stock percentage. A 30-year-old would hold 90% stocks, 10% bonds. A 50-year-old would hold 70% stocks, 30% bonds. This rule assumes you're investing for retirement and can handle normal market swings.
3. Adjust for shorter timelines. Money you need within 5 years should be mostly in bonds or cash. Within 3 years, keep it in high-yield savings or CDs paying 3.5-4.5% as of 2026. The stock market can lose 20-40% in bad years, so you need time to recover.
4. Rebalance every 12 months. Check your allocation once a year and buy or sell to get back to your target percentages. If stocks did well, sell some and buy bonds. If bonds outperformed, do the opposite. This forces you to buy low and sell high automatically.
5. Shift more conservative as you age. Every 5-10 years, reduce your stock allocation by 5-10 percentage points. Someone retiring at 65 might hold 40-50% stocks instead of 90%. You still need some growth to beat inflation, but you can't afford major losses when you're living off the money.