Rule of 110: How to Calculate and Examples

When building an investment strategy, your asset allocation is one of the most important decisions you will make. The Rule of 110 helps investors decide how much of their portfolio to allocate to stocks versus bonds based on their age. It is a helpful starting point for those looking to balance growth potential with risk management over time. However, like any rule of thumb, you should adapt the rule to your personal financial situation, goals and risk tolerance. 

If you want help with asset allocation or managing your portfolio, ask a financial advisor for customized guidance.

The Rule of 110 helps you determine a stock-to-bond ratio appropriate for your age. To apply the rule, subtract your age from 110. The result is the percentage of your portfolio you might consider investing in stocks. You would then allocate the remainder to bonds and other more conservative investments, like cash and cash equivalents.

The Rule of 110 assumes younger investors can take on more risk because they have longer to ride out market volatility. As you age, reducing exposure to stocks helps preserve your wealth and protect against major market downturns during retirement.

However, it is important to remember that no single formula can account for everyone’s unique circumstances. Risk tolerance, time horizon, goals and obligations can all shape your allocation.

Using the Rule of 110 is straightforward:

• Subtract your current age from 110.
• The resulting number represents the percentage of your portfolio you should allocate to stocks.
• The remaining percentage is invested in bonds or similarly conservative assets.

For example, if you are 40 years old, you would have a 70/30 allocation by allocating 70% of your portfolio to stocks and 30% to bonds.

This method provides a simple framework for aligning your investments with your stage of life and changing risk tolerance.

Let’s take a closer look at how the Rule of 110 works using some examples.

Suppose you’re 30 years old. Since 110 – 30 = 80, you would allocate 80% of your portfolio to stocks and 20% to bonds. Within the stock allocation, you might choose a higher percentage of growth-oriented stocks. This includes investments like U.S. large-cap equities, small-cap stocks, and even some exposure to international or emerging markets. You could place the bond portion in lower-risk government bonds or high-quality corporate bonds to help balance volatility without sacrificing too much growth potential.

At 50, the recommended allocation would be 60% stocks and 40% bonds (110 – 50 = 60). This is a 60/40 allocation, but the stock portion may shift slightly toward more stable, dividend-paying companies rather than pure growth stocks. The bond allocation would typically combine intermediate-term government bonds, municipal bonds (for tax efficiency) and investment-grade corporate bonds. This helps generate consistent income and reduce portfolio swings.

At 65, you may be retired or close to retiring, making safety a key concern. Since 110 – 65 = 45, the rule suggests 45% stocks and 55% bonds. Your stock allocation could focus primarily on blue-chip, dividend-paying stocks and defensive sectors (such as healthcare and consumer staples) to limit downside risk. The bond allocation could lean more heavily into highly-rated government bonds, bond funds or even annuities to prioritize income and principal preservation.

These examples show how the Rule of 110 moves your portfolio from growth to preservation over time. Younger investors take on more stock market risk to capture growth. Meanwhile, older investors gradually transition into more conservative investments to protect their accumulated wealth as retirement draws closer.