How much in stocks, how much in bonds: a ladder from 80/20 to 25/75
The one decision that shapes a simple portfolio more than any other is the share of stocks. Here is the whole ladder, from bold to cautious.
The rule
Choose a fixed share for stocks and put the rest in bonds: 80/20, 75/25, 65/35, 60/40, 40/60 or 25/75. Once a year, sell some of the part that grew and buy the part that lagged, to return to the chosen split.
Why people use it
Stocks grow faster over the long run but fall harder. Bonds are steadier and often hold up when stocks drop. The more stocks you hold, the higher the expected growth and the deeper the falls along the way, and the other way round. Benjamin Graham gave investors a simple frame: never less than 25% and never more than 75% in stocks, and choose where in that range to sit by your temperament. Vanguard sells ready-made funds on this ladder (LifeStrategy Growth at 80/20, Moderate at 60/40, Conservative at 40/60). The oldest of them, Vanguard Wellington, has run since 1929 and holds roughly two thirds in stocks; John Bogle, who later founded the index fund, liked it.
Where it hurts
No split is right for every year. A stock-heavy mix falls hard in a crash, just when you may need the money. A bond-heavy mix can fail to keep up with rising prices over decades, and it also suffers when interest rates rise, as in 2022. And the share you can really live with is only found when the account falls.
How our bot runs it
Six bots: Vanguard Growth (80/20), Graham aggressive (75% stocks, 25% bonds, the top of his range), Vanguard Wellington (about 65/35), Vanguard Moderate (60/40), Vanguard Conservative (40/60) and Graham defensive (25/75, the bottom of his range). Each keeps its published split and restores it on the first trading day of January. The Vanguard bots are a stand-in, not the funds themselves. In LifeStrategy the stock part is 60% SPY (US) and 40% EFA (developed markets outside the US); Wellington's is all SPY. The bond part of each is AGG, the US bond market only, with no foreign bonds. Put the accounts side by side and you can see how the share of stocks changes the ups and downs.
Live account
A virtual $100,000 account that follows this rule. Every trade is on the bot's page.
| Bot | Account | Return |
|---|---|---|
| Graham's upper limit: 75% stocks | $97,159 | −2.84% |
| Graham's lower limit: 25% stocks | $99,628 | −0.37% |
| Vanguard LifeStrategy Growth: 80/20 | $97,779 | −2.22% |
| Vanguard LifeStrategy Moderate: 60/40 | $98,563 | −1.44% |
| Vanguard LifeStrategy Conservative: 40/60 | $99,313 | −0.69% |
| Vanguard Wellington: about 65/35 | $97,654 | −2.35% |
More guides
The Golden Butterfly: five equal parts, with gold and small companies
How much in stocks, how much in bonds: a ladder from 80/20 to 25/75
The Golden Butterfly: five equal parts, with gold and small companies
Portfolios
LifeStrategy 80/20
Origin and history since 1926
Graham 75/25
Origin and history since 1926
Vanguard Wellington
Origin and history since 1926
LifeStrategy 60/40
Origin and history since 1926
LifeStrategy 40/60
Origin and history since 1926
Graham 25/75
Origin and history since 1926
Portfolio builder
Set the shares of stocks, bonds, gold or take famous models, mix them, and see how such a portfolio lived through every era of history.
Goal finder
Say what you need — for example, 6 % a year over 10 years with a drop no deeper than −25 % — and see which models and mixes met it, and in what share of historical periods.
Retirement: how much to withdraw
The 4 % rule tested on 60 portfolios: which share of the money you could take out every year, and when it failed.