Asset Allocation Calculators: What They Are and How to Use Them

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When you first start investing, it can be easy to feel overwhelmed by the sheer number of different investment products available to choose from. Should you put your money into stocks, bonds, certificates of deposit (CDs), mutual funds, various other investments — or a combination of these? The answer is different for just about every investor, and you’ll want to figure out what yours is before you start putting your money into different investment vehicles.

Answering that question and figuring out your allocation strategy — what you’ll invest in and how much you’ll invest — can take some time when you’re a beginner. That’s where helpful tools called asset allocation calculators can come in handy. Using these calculators can assist you in making informed decisions that fit your financial goals, but it’s important to understand what they are and how they work before you jump into using one. Take a look at the basics of asset allocation calculators to get started.

What Are Asset Allocation Calculators, and What Do They Do?

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An asset allocation calculator can help you figure out how to create your ideal portfolio based on your age, risk tolerance and various other factors. The idea is to help you determine the ideal balance of risk and reward for your particular financial situation by diversifying your portfolio with different types of investments.

Some investors prefer to play things on the safe side and confine their investments to things like CDs or high-yield savings accounts. While this is about as safe an investment strategy as it gets, the trade-off is that it usually generates very small returns. Other investors are all about high-risk, high-reward strategies, such as day trading. While this can be very lucrative, it’s also very hands-on and requires a deeper understanding of financial markets.

Creating a balanced portfolio means finding that perfect-for-you middle ground that incorporates financial products with various levels of risk. That way, you’ll have a portion of your portfolio dedicated to lower-return investments that are most likely to earn returns, along with a balance of stocks and other equities that are potentially more profitable but also riskier. Over time, your investing strategies and goals are likely to change, too, and asset allocation calculators provide an effective way to help refine your investments over time to ensure they continue to suit your needs.  

Asset Allocation Calculator Features and Categories

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Why is asset allocation so important? According to Jack Bogle, the founder of investment advisory company Vanguard, “The most fundamental decision of investing is the allocation of your assets: How much should you own in stocks? How much should you own in bonds? How much should you own in cash reserve?” An asset allocation calculator can help you answer these questions by providing you with a ratio of how much of your savings you should put into the following major categories.


Stocks are shares of companies that are available to purchase on the stock market. When you invest in stocks with solid track records, the hope is that the value of your shares will rise over time. While an asset allocation calculator can’t tell you specifically which stocks to invest in, it can advise you on what percentage of your savings to invest in the stocks of your choice.  


While buying shares makes you a partial owner in a company, bonds are a way to give out loans to a government or business. The trade-off is that when your bonds mature, you’ll be able to collect the interest your loan has earned during the term of the investment. U.S. Treasury bonds are generally considered the surest bet among bonds, as they’re backed by the government and are virtually risk-free.


Cash doesn’t necessarily refer to bills and coins but can include money you put into a high-yield savings account, a short-term CD or a money market fund. While cash investments tend to have a pretty low rate of return, they offer a buffer because they’re more liquid and typically come with very little risk.

How Do You Use an Asset Allocation Calculator?

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There are plenty of free asset allocation calculators online that can suggest a model portfolio ratio for you. To do this, they usually ask you to enter some basic information they can take into account. Some of the most common details you’ll be asked about include your age, financial situation and risk tolerance.

Age tends to play an important role because it assumes that your savings are geared for your retirement. If you’re saving for a shorter-term goal, however, that’s something you’ll want to input into the calculator. In general, the further you are away from using the money you intend to invest, the more money you’ll probably be advised to put into stocks (generally the option with the greatest risk and potential reward).

If, for example, you’re 30 years old and don’t intend to cash out on your investments for over 15 years, you’ll have more time available to ride the ups and downs of the stock market over the course of several years. If, on the other hand, you plan to retire in fewer than five years, you’ll likely be advised to invest primarily in shorter-term investments such as bonds so your money is less susceptible to the effects of market volatility.

How Can an Asset Allocation Calculator Help Shape Your Portfolio?

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Keep in mind that, when it comes to investing, nothing is written in stone. An asset allocation calculator is intended to be a tool that can make suggestions based on the information you provide. But remember that it never hurts to get a second opinion. There are many different free asset allocation calculators available online, and some of them may take more information into account than others. You’ll want to ensure the calculators get a holistic view of your financial situation and goals before you base your decisions on the information they provide.

For example, some calculators advise you on how to build an ideal portfolio based on nothing more than your risk tolerance. This can be great if you want to keep things short and sweet or aren’t planning on investing large amounts. By simply looking over the different types of risk levels, you can get a good idea of the smartest investment style for you depending on whether you want to play it safe or embrace the risk of going all-in for the chance of earning a higher return.

Other calculators are much more comprehensive and ask numerous questions to help you really zero in on your goals and situation before formulating suggestions based on your unique situation. This can be helpful if you’re new to investing or haven’t really taken the time to pinpoint what your goals are. By carefully thinking about how long you intend to keep your money invested or how experienced a trader you’d consider yourself, you can form a much more realistic sense of what your best options are with some help from an asset allocation calculator.