George M. Hiller
Companies LLC
1110 Monarch Plaza
3414 Peachtree Rd. NE
Atlanta, GA 30326

404-365-0222
800-359-0222

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Financial Planning - The Rule of 120

What percentage of your investment portfolio should be invested in stocks? The answer to this question will vary depending upon your particular objectives, facts and circumstances, but you can apply the Rule of 120 to come up with a ballpark answer. The Rule of 120 is simply this: take 120 and subtract your age from it. This is the percentage amount that you should have invested in stocks or stock mutual funds.

For example, if you are 40 years of age, then 120 minus 40 equals 80. You should have 80% of your investment portfolio invested in stocks. If you are 60 years of age, then 120 minus 60 equals 60. You should have 60% of your investment portfolio invested in stocks or stock mutual funds.

This rule is designed to recognize the fact that in general when we are younger we need to focus on capital growth and can afford to take more risk. As we grow older our need tends to shift away from capital growth and more toward a focus on income and greater stability of principal.

For an investor that wants to be more conservative than what the Rule of 120 comes up with you can simply adjust the rule downward and make it the Rule of 110. Subtract your age from 110 for the percentage amount to invest in stocks or stock mutual funds.

© Copyright 2006 George M. Hiller Companies, LLC. All rights reserved. 1110 Monarch Plaza, 3414 Peachtree Rd., N.E., Atlanta, Georgia, 30326. Although data are gathered from reliable sources, George M. Hiller Companies cannot guarantee completeness and accuracy.
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