The new investing rule of thumb you should probably be using


We financial planners love rules of thumb. Honestly, it sometimes seems like everything we learn in years of schooling and training is boiled down into a series of broad stroke rules about how much you should save, spend on a house, set aside for taxes and on and on.

One of our favorite rules is called ‘Own Your Age in Bonds’ (OYAIB). This rule says that the percentage of bonds in your portfolio should equal your age. If you are 40, just 40% of your money should be in bonds. If you are 80, then, you guessed it, 80% of your assets should be bonds.

The base for OYAIB is that as we move nearer to retirement, we want to trade the growth potential and volatility of stocks for the comparative safety and predictability of quality bonds.

I think it’s time to replace this venerable guideline.

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Moving beyond OYAIB

Don’t get me wrong. OYAIB is an OK rule, but it’s less useful today with the significant shift we’re seeing in the bond market.

As interest rates fall, bonds go up. That was happening for 30 years – until mid-2016, when rates started to move slowly higher from all-time lows. While interest rate trends are hard to predict, we could be in for 20 or 30 years of the inverse of what we’ve seen. That means the 8% per year return that bonds have averaged since 1976 would be unlikely over the next 40 years.

own your age in bonds

OYAIB also fails to consider today’s longer lifespans. You could be retired for 25 or 30 years…or even longer. Funding such a long stretch of living will probably require you to take more risk than earlier generations of retirees. That means owning more stocks, which offer the potential for growth at the cost of higher volatility.

Introducing the 15/50 Stock Rule

Investors with at least a moderate risk tolerance might want to replace OYAIB with a guideline that could be more timely and effective. I call this new guideline the 15/50 Stock Rule. It’s a fairly simple approach. If you believe you have more than 15 years remaining on this Earth, your portfolio should consist of at least 50% stocks, with the remaining balance in bonds and cash. This approach helps you maintain a balance between risk and reward.


This really isn’t a new idea. The 50/50 portfolio idea has been around for decades. Columbia Business School professor Benjamin Graham, who is considered the father of value investing, was a big proponent of the approach. Vanguard founder John Bogle believes the 50/50 strategy is the ideal strategy for defensive investors.

The stock portion of your portfolio can be made up of either dividend-payers or growth stocks. Just be sure to keep an eye on your holdings and reallocate as necessary to prevent stocks from sneaking beyond the 50% mark.

As Benjamin Graham explained, “When changes in the market level have raised the common-stock component to, say, 55% the balance would be restored by a sale of one-eleventh of the stock portfolio and the transfer of the proceeds to bonds. Conversely, a fall in the common-stock proportion to 45% would call for the use of one-eleventh of the bond fund to buy additional equities.”

Makes sense, right?

Again, a 15/50 Stock Rule portfolio requires more risk tolerance than one based on OYAIB, especially if you are in your 70’s. But, as the poker players say, scared money don’t make money. And with bonds falling and life expectancy rising you may need to make a little more money to power your retirement for the next 15 years and beyond.

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