Schwab MoneyWise ®
Schwab MoneyWise®

Finding the Right Asset Allocation

Select a plan—and stick with it

Our Two Cents

Generally, the longer you have to invest, the more you can tolerate a riskier allocation. Many 401(k) plans offer investment choices based on your retirement date.

How you invest across stocks, bonds and cash—your asset allocation—is one of the keys to long-term success. That's because these three basic asset classes respond to the market differently. When one is up, another can be down.

For instance, stocks are the most volatile and respond more quickly to market movements. Bonds, on the other hand, can provide a more stable return. Investing in both can help smooth out volatility.

Choosing the allocation that's right for you

How you allocate your assets should be based on three things:

  • Your goals—both short- and long-term
  • The number of years you have to invest
  • Your tolerance for risk

Basing your asset allocation on these three important factors will make it easier for you to stick to your plan over the long term—even during years when there's a loss.

Here are some model asset allocation plans that offer different balances of risk and return.

Strategic asset allocation models

  • Conservative Allocation

    • 15% Large-Cap Equity
    • 0% Small-Cap Equity
    • 5% International Equity
    • 50% Fixed Income
    • 30% Cash Investments

  • Moderate Allocation

    • 35% Large-Cap Equity
    • 10% Small-Cap Equity
    • 15% International Equity
    • 35% Fixed Income
    • 5% Cash Investments

  • Aggressive Allocation

    • 50% Large-Cap Equity
    • 20% Small-Cap Equity
    • 25% International Equity
    • 0% Fixed Income
    • 5% Cash Investments

Diversification and asset allocation do not eliminate the risk of investment losses. International investing may involve greater risk than U.S. Investments due to currency fluctuations, unforeseen political and economic events, and legal and regulatory structures in foreign countries. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. The Schwab Center for Financial Research is a division of Charles Schwab & Company, Inc.

Source: Schwab Center for Financial Research.
© 2017 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. (0116-3593)

Need help?

For an easy way to choose an asset allocation plan, fill out the investor profile questionnaire (PDF). It will help you define your attitude toward risk and suggest an asset allocation plan that matches it.

Keep learning

Read more about investing and then meet with a financial professional to help create a comprehensive, individualized plan.

This is for informational purposes only and is not a solicitation or a recommendation that any particular investor should purchase or sell any particular security.

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Investing involves risk, including possible loss of principal.

The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

The Charles Schwab Foundation is a 501(c)(3) nonprofit, private foundation that is not part of Charles Schwab & Co., Inc. or its parent company, The Charles Schwab Corporation.

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