Asset Allocation

You’ve heard the advice: “Invest in a diversified portfolio of stocks and bonds.” Great. But how much in stocks? How much in bonds? What about real estate, international stocks, small-cap vs large-cap? You’re guessing based on some generic rule like “60/40” or “your age in bonds,” but you have no idea if that actually makes sense for your situation.

Here’s the truth: asset allocation—how you split your money across stocks, bonds, real estate, cash, and other investments—is the single biggest driver of your portfolio’s returns. Not stock picking, not market timing. How you divide your portfolio matters way more than which specific funds you choose.

We help Phoenix investors build asset allocations based on their actual risk tolerance, timeline to retirement, and financial goals. That means running the numbers on how much risk you need to take (not how much you want to take) to hit your goals, and making sure your portfolio matches your real-world ability to handle volatility.

Risk Tolerance vs Risk Capacity

Risk tolerance is psychological—how much volatility can you handle without panicking and selling at the bottom? Risk capacity is mathematical—how much can you afford to lose based on your timeline and goals?

Some people have high risk tolerance (they don’t panic when the market drops) but low risk capacity (they’re retiring in three years and can’t afford a 30% drawdown). Others have low risk tolerance (they freak out when the market drops 10%) but high risk capacity (they’re 30 years from retirement and have plenty of time to recover).

Your asset allocation needs to account for both. We don’t just ask “How much risk can you stomach?”—we also ask “How much risk do you need to take to hit your goals?” and “How much can you afford to lose without derailing your plan?”

Age-Based Rules Are Oversimplified

The old rule was “hold your age in bonds”—if you’re 40, keep 40% in bonds and 60% in stocks. That’s way too conservative for most people. With people living into their 90s and retirements lasting 30+ years, a 60/40 portfolio at age 40 probably won’t generate enough growth to sustain a long retirement.

A better approach: subtract your age from 110 or 120 to get your stock allocation. If you’re 40, that’s 70-80% stocks, 20-30% bonds. But even that’s oversimplified—it doesn’t account for your specific situation, risk tolerance, income needs, or other assets.

We build asset allocations based on your actual situation, not generic age-based rules.

Rebalancing: Keeping Your Allocation on Track

Once you set an asset allocation, it drifts over time. If stocks do well, your 70/30 portfolio might become 80/20—leaving you with more risk than you planned for. If stocks crash, your 70/30 might become 60/40—leaving you too conservative.

Rebalancing means selling what’s done well and buying what’s lagged to get back to your target allocation. Most people don’t do this—they let winners run and avoid buying what’s down. That’s the opposite of “buy low, sell high.”

We rebalance client portfolios regularly (usually annually or when allocations drift 5+ percentage points) to keep risk in check and systematically buy low and sell high.

What We Do

We assess your risk tolerance through a combination of questionnaires and conversation. We calculate your risk capacity based on your timeline, goals, and financial situation. We build an asset allocation that balances both—giving you enough growth potential to hit your goals without taking more risk than you can afford or handle psychologically.

We also rebalance regularly to keep your portfolio on track, and we adjust your allocation as your situation changes—moving toward more conservative investments as you approach retirement or getting more aggressive if your timeline extends.

The Bottom Line

Asset allocation is the most important investment decision you’ll make. Get it right, and you’ll build wealth steadily without taking unnecessary risks. Get it wrong, and you’ll either take too much risk (and panic-sell during downturns) or too little risk (and fail to hit your goals).

Want to make sure your portfolio allocation makes sense for your situation? Let’s review your risk tolerance and build a plan.