The emergency fund isn't part of the allocation: it's what keeps you from having to sell at the worst possible time.
Without an emergency fund, any unexpected expense forces you to sell right when the market is down — turning a temporary drop into a permanent loss. The allocation below is still valid, but it's the second step, not the first.
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The three criteria, side by side
The suggestion above is the lower of the first two: a single criterion that gets breached breaks the whole allocation. The age rule is shown only as a contrast.
| Criterion | Stocks | What it measures |
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These are rule-of-thumb guidelines, not an exact calculation or personalized advice: they don't know your income, job stability, debts, or family situation. The drawdown criterion starts from two stated assumptions — that an all-stock portfolio can fall by around 50% in a severe crisis (2000-2002, 2008) and that bonds can fall by around 10% in a bad year (2022) — and looks for the allocation whose estimated drawdown matches what you say you can tolerate; the horizon criterion starts from the idea that money needed in the short term shouldn't depend on what the market does that particular year. Check how your chosen allocation performs in the portfolio projector, including a bad sequence of years.
What each field means
A quick look at each input and each result.
Not your retirement age, but when you'll start withdrawing this particular money. If it's for a down payment in four years, that's four years, whether you're 30 or 55.
The honest question: if the portfolio were worth that percentage less tomorrow, would you keep contributing without touching anything? Overstating this is the most expensive mistake of all.
Only feeds the "110 minus age" contrast rule. It doesn't affect the suggestion: two people the same age with different horizons don't need the same portfolio.
Three to six months of expenses, liquid and outside your investments. It's what lets you ride out a drawdown without selling, which is why it comes before the allocation.
The part that grows over the long run and crashes in the short run. Globally diversified equities, not individual stocks.
The ballast that cushions the drops. It earns less and isn't immune — 2022 made that clear — but it falls much less than stocks when stocks really fall.
The order of magnitude of what you might see temporarily lost with this allocation in a severe crisis. It's not a guaranteed limit: it's the figure you should be able to look at without selling.
Which of the two limits is the tighter one. If the horizon dominates, you gain time; if tolerance dominates, you build habit — or lower the bar.
Optional. Leave it at zero and you'll see the allocation in percentages. Enter an amount and the tool calculates how many dollars would go to each side, accounting for the drawdown you'd tolerate.
How to fill out this calculator
Steps to use the calculator (expand)
- Set the real horizon for this money. When you'll start withdrawing it, not when you retire. If you have goals with very different timelines, repeat the calculation separately for each one.
- Answer the drawdown question honestly. Think in dollars, not percentages: on $40,000, a −30% is $12,000 less on your statement. If that figure would make you sell, lower the bar.
- Enter your age. It's only used for the contrast rule in the table; it doesn't change the suggestion.
- Confirm your emergency fund. If you uncheck it, a warning appears: the emergency fund comes before investing, not after.
- Read "why this number." That's where the real value is: knowing whether your limit is the timeline or your stomach, because each is fixed in a different way.
- Stress-test the result. Take the allocation to the portfolio projector to see it through a bad sequence of years, and to 5/25 rebalancing to know when it's worth resetting.
Frequently asked questions about this calculator
Why is the suggestion the lower of the two criteria instead of an average?
Because they're constraints, not opinions to average. If you need the money in three years, it doesn't matter how well you sleep through drawdowns: the timeline just isn't there. And if the horizon is thirty years but you'd sell the moment it dropped 10%, an aggressive portfolio ends up sold in the first crisis. The portfolio that works is the one that survives both limits.
Why doesn't age factor into the result?
Because age is a crude stand-in for what actually matters: the time horizon. A 60-year-old who won't touch that money for twenty years is in a different situation than a 60-year-old who needs it next year, and the "110 minus age" rule would give them the same answer. It's shown here only as a contrast, so you can see how far it deviates from the suggestion and why.
How does my drawdown tolerance translate into a stock percentage?
Starting from two assumptions stated up front: equities can fall by around 50% in a severe crisis, and bonds can fall by around 10% in a bad year. From there, the tool looks for the mix whose estimated drawdown matches what you say you can tolerate. If you can tolerate −30%, you get 50% in stocks, because that portfolio falls by roughly that −30%. This is deliberately different from the back-of-the-envelope rule of "double whatever you can tolerate," which produces higher numbers because it assumes bonds never fall — and 2022 made clear that they do.
Don't bonds ever fall?
They do. In 2022, bonds fell alongside stocks, which is exactly when it hurt the most. What you should expect from bonds isn't that they never lose value, but that they lose much less than stocks when stocks truly crash. That's why the estimated drawdown above is never zero, even for an all-bond portfolio.
How is this different from the portfolio projector?
This calculator answers "what allocation fits me?"; the portfolio projector answers "what would have happened with this allocation?" The natural order is to use this one first to set a starting point, then the projector afterward to stress-test it, including a bad sequence of years.
Once I've picked an allocation, how do I maintain it?
Over time the market throws it out of balance: the side that rises gains weight and the portfolio becomes riskier than you intended. That's fixed by rebalancing, and the 5/25 rule tells you when it's worth doing: 5/25 rebalancing.