How do I pick a stock/bond ratio?

A common starting point is '110 minus your age' in stocks — so ~80% stocks at age 30. But that's just a rule of thumb; what really matters is the drawdown you can stomach. Compare the downside (10th percentile) of a few splits in the calculator instead of memorising a formula.

Why not just go all-stock for the highest return?

All-stock has the highest median, but also the deepest downside. Most people can't sit through a -40% paper loss without selling at the bottom — and then they never get the long-term return. A bit of bonds trades a little return for a much better chance of holding on.

2022's joint stock-bond selloff made people doubt it, but over 10-year-plus horizons the bond cushion still holds in most historical cases. The point isn't to cling to exactly 60/40 — it's to set the ratio from your age, risk tolerance, and correlation assumption.

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Stocks vs Bonds: Is 60/40 Still Worth It?

All-stock has the highest return — and the most painful crashes. Adding a low-correlation slice of bonds cuts the swings far more than it cuts the return. That trade is the whole point of a stock/bond split.

Portfolio Allocation Optimizer

Two assets, one question: how much in each? Set their return and volatility, and let the simulation find your optimal split.

Capital & horizon

Starting capital

Time horizon

yrs

Asset A

Preset

Expected return (CAGR)

Volatility

How wildly yearly returns swing around the expected return. A broad stock index sits around 15%; single sectors and leveraged products are far higher.

Asset B

Preset

Expected return (CAGR)

Volatility

How wildly yearly returns swing around the expected return. A broad stock index sits around 15%; single sectors and leveraged products are far higher.

Advanced

How the two move together

Correlation measures whether the two assets rise and fall together. The less they move in lockstep, the more a blend cuts risk — that's the whole point of diversification.

Rebalance yearlyEach year, sell the winner and top up the laggard to restore your target split. This is the standard assumption behind the efficient frontier and is what makes a blend’s lower risk durable. Turn it off to see buy-and-hold drift toward the higher-return asset.

Limit max drawdownCap how deep a peak-to-trough fall the recommended mix may risk. Each strategy then picks the best split that stays within the cap, pushing the answer toward the steadier asset. A cap looser than the calmest mix changes nothing.

Drawdown cap

Optimize for

Picks the split with the best return per unit of risk (CAGR ÷ volatility). Usually an interior blend, since diversification lowers risk faster than it lowers return.

This is a risk-adjusted ratio (the Sharpe ratio), NOT a win rate. It measures how much annual growth you get per unit of volatility you endure — higher means a more efficient trade-off. A blend often scores highest because diversification cuts volatility faster than it cuts return.

Optimal allocation

40% A / 60% B

A = Asset A · B = Asset B

Median 355K · sim. CAGR 6.5% · volatility 7.0%

35–45% Asset A is near-optimal — the exact split barely matters here.

Unlucky (P10)

235K

Typical (P50)

355K

Lucky (P90)

531K

Max drawdown

Median worst peak-to-trough drop along the simulated paths for this mix — the deepest loss you'd typically endure before recovering.

−7.0%

Optimal mix

100% A

100% B

Median ending

355K

615K

220K

Downside (P10)

235K

276K

146K

Volatility

7.0%

14.0%

7.0%

Max drawdown

−7.0%

−18.4%

−10.7%

Ending wealth by allocation

Median10–90% rangeOptimalNear-optimal

Based on 168000 simulated paths. A simplified lognormal model — not a forecast. Real markets have fatter tails and shifting correlations; treat these as rough odds, not promises.

What this scenario works out to

Under these assumptions, the best mix lands near 40% Stocks / 60% Bonds. After 20 years that blend's median outcome is about 358K, with a rough-patch (10th-percentile) value near 236K.

These figures use this scenario's example returns and volatility — swap in your own holdings' numbers in the calculator above.

How to read this result

Stocks earn more over time but swing hard; bonds earn less but hold up when stocks fall. Because the two barely move together, blending them gives a portfolio whose volatility is lower than the line between them — that's diversification doing its job. The optimiser targets the best risk-adjusted mix (Sharpe), so it doesn't pick all-stock (highest return) or all-bond (steadiest) — it picks the split that buys the most return per unit of risk.

Good fit: people who want a calmer ride for only a little less return, or who have a 10-year-plus horizon but would panic-sell in a deep drawdown.

Watch out: bonds aren't risk-free — they fall when rates rise, and in years like 2022 stocks and bonds drop together, so the cushion temporarily fails. Change the correlation assumption and the best split moves with it.

Common questions

How do I pick a stock/bond ratio?: A common starting point is '110 minus your age' in stocks — so ~80% stocks at age 30. But that's just a rule of thumb; what really matters is the drawdown you can stomach. Compare the downside (10th percentile) of a few splits in the calculator instead of memorising a formula.
Why not just go all-stock for the highest return?: All-stock has the highest median, but also the deepest downside. Most people can't sit through a -40% paper loss without selling at the bottom — and then they never get the long-term return. A bit of bonds trades a little return for a much better chance of holding on.
Is 60/40 dead?: 2022's joint stock-bond selloff made people doubt it, but over 10-year-plus horizons the bond cushion still holds in most historical cases. The point isn't to cling to exactly 60/40 — it's to set the ratio from your age, risk tolerance, and correlation assumption.

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How should you split capital between two assets? Set each one's CAGR and volatility, choose their correlation, and simulate thousands of paths to find the allocation that maximizes risk-adjusted return, median wealth, or downside protection.

Built by indigo.la.ringo · AppicLab · Last updated: June 25, 2026