Asset Allocation and Rebalancing Guide by Age and Goals

⚠️ 90/10 Isn't Right for Everyone

Warren Buffett's 90/10 strategy is powerful, but remember one crucial point: Buffett's wife and heirs are already extremely wealthy. That's why they can afford a more aggressive allocation.

If you're not starting with millions of dollars, you may need a more conservative approach.

📊 Vanguard's Age-Based Asset Allocation Guide

Vanguard recommends asset allocation based on age and investment horizon:

Age Range	Stocks	Bonds	Description
20s-30s	90%	10%	Long horizon, can handle volatility
40s	80%	20%	20+ years to retirement
50s	70%	30%	Beginning retirement prep
60s	60%	40%	Prioritizing stability
70s+	50%	50%	Capital preservation focus

🎢 Why Increase Bond Allocation as You Age?

The Reality of Volatility

Vanguard's 100-year historical data:

Portfolio	Best Annual Return	Worst Annual Return	Range
100% Stocks	+54.2%	-43.1%	97.3pp
80/20	+45.4%	-34.9%	80.3pp
60/40	+36.7%	-26.6%	63.3pp
40/60	+27.9%	-18.4%	46.3pp

After Retirement...

In retirement, you're withdrawing from your portfolio. If a big crash hits:

You must sell stocks at low prices
Not enough time to recover
"Sequence of Returns Risk" kicks in

That's why reducing volatility as retirement approaches is crucial.

🔄 Rebalancing: Annual Checkup

What is Rebalancing?

Over time, stock and bond proportions shift. For example:

Start: Stocks 80% / Bonds 20% After 1 Year (stocks up): Stocks 88% / Bonds 12%

Rebalance: Sell some stocks, buy bonds to return to 80/20

Benefits of Rebalancing

Risk Management: Maintain intended risk level
Automatic Trading: "Sell high, buy low" effect
Discipline: Prevents emotional decisions

How to Execute

Frequency: Once per year (birthday, New Year's—easy to remember)
Method: Reduce overweight assets, increase underweight
Tax Consideration: Do it in retirement accounts to avoid taxes

🛑 Biggest Mistake: Abandoning Ship During Downturns

JP Morgan's Data

According to JP Morgan research, in most years, the S&P 500 experiences 10%+ intra-year declines. Even in years with positive annual returns!

Why You Must Endure

Selling during downturns means:

Locking in losses
Missing recovery
Breaking compound effect

Choosing an allocation that fits YOU is key to surviving downturns.

📌 Execution Checklist

Step 1: Determine Asset Allocation

Consider age and retirement timing
Assess risk tolerance
Set target ratio (e.g., 80/20)

Step 2: Choose Funds

Low-cost S&P 500 ETF (VOO, IVV, SPY)
Short-term bond ETF (SHV, VGSH, BIL)

Step 3: Rebalancing Schedule

Set annual rebalancing date
Add calendar reminder

🎯 Key Message

"Knowing what to do and actually doing it consistently are two different things."

Find an asset allocation that fits you, and build a portfolio you can stick with during downturns. That's the true essence of the Buffett strategy.

Keep it simple, keep costs low, and let time work its compounding magic!