Asset allocation — how you split your portfolio between growth assets (shares, property) and defensive assets (bonds, cash) — is the single most important driver of long-term investment outcomes. The right allocation changes as you age: younger investors can afford more growth risk, while those approaching or in retirement typically shift toward more defensive holdings. Here is a practical guide for Australians at each life stage.
The Core Principle: Time Horizon Drives Allocation
The key question is not your age per se, but how long until you need the money. A 60-year-old investing for a 25-year retirement still has a long time horizon. A 30-year-old saving for a house deposit in two years does not.
As a starting rule of thumb, many financial planners suggest:
Shares allocation ≈ 110 minus your age
- Age 25: ~85% shares, ~15% defensive
- Age 35: ~75% shares, ~25% defensive
- Age 45: ~65% shares, ~35% defensive
- Age 55: ~55% shares, ~45% defensive
- Age 65: ~45% shares, ~55% defensive
This is a guideline only — your actual situation, risk tolerance, and goals should inform your specific allocation.
Asset Allocation by Life Stage
In Your 20s — Maximise Growth
Typical allocation: 85–100% growth assets
At this stage you have the most powerful investment advantage: time. Even significant market downturns of 40–50% can be fully recovered within a few years when you have decades ahead. The appropriate strategy is aggressive growth, fully invested in shares.
Common portfolios:
- 100% DHHF or VDHG (all-in-one ETF)
- 70% VGS (international) + 30% VAS (Australian)
In Your 30s — Growth With Some Structure
Typical allocation: 80–90% growth assets
In your 30s you may have more financial complexity — mortgage, children, superannuation building up. A still-predominantly-growth portfolio is appropriate, but you may begin to think about what defensive assets serve you.
Common portfolios:
- DHHF (100% shares) or VDHG (90% shares, 10% bonds)
- 70% VGS + 30% VAS, reviewed annually
In Your 40s — Balancing Growth and Security
Typical allocation: 65–80% growth assets
With peak earning years and increasing financial commitments, some investors in their 40s begin introducing modest defensive allocations. However, with 20+ years until retirement, a predominantly growth portfolio remains appropriate for most.
Common portfolios:
- VDHG (90/10 growth/bonds)
- VAS 30% + VGS 50% + VAF (bonds) 20%
In Your 50s — Shifting Toward Balance
Typical allocation: 50–70% growth assets
As retirement approaches within 10–15 years, sequencing risk increases — a major market crash shortly before retirement can permanently impair your retirement income. Gradually increasing defensive allocation reduces this risk.
Common portfolios:
- Balanced/diversified ETF with 60% shares / 40% bonds
- Increasing cash and bond allocation each year (known as a “glide path”)
At and In Retirement (60s+) — Income Focus
Typical allocation: 40–60% growth assets
Retirees still need their portfolio to grow — a 65-year-old may live another 25–30 years. Being entirely in cash or bonds risks running out of money. A balanced portfolio with meaningful share exposure, focused on generating sustainable income, is typical.
Common approaches:
- Account-based pension invested in balanced or growth option
- Dividend-focused shares/ETFs for income
- Bucket strategy — 1–3 years of living expenses in cash, 3–10 years in bonds, 10+ years in growth assets
Australian Super Fund Options as a Reference
Australian super funds offer investment options that can serve as benchmarks for appropriate age-based allocation:
| Super fund option | Shares allocation | Suited to |
|---|---|---|
| High growth | 85–96% | Under 40, long horizon |
| Growth | 70–85% | 40–55, medium-long horizon |
| Balanced | 50–70% | Approaching retirement |
| Conservative | 30–50% | In or near retirement |
| Cash | ~0% | Very short-term, or as a bucket |
These are general descriptions — actual allocations vary by fund. Past performance is not a reliable indicator of future performance.
The Glide Path — Automatic Gradual De-risking
A glide path is a strategy of gradually reducing growth asset exposure each year as you approach retirement. For example:
- Age 50: 80% shares
- Age 55: 70% shares
- Age 60: 60% shares
- Age 65: 50% shares
Some lifecycle super fund options do this automatically. For personal investment portfolios, it requires annual rebalancing.
Rebalancing Your Portfolio
As markets move, your actual allocation drifts from your target. Annual rebalancing — selling what has grown above target and buying what has fallen below — maintains your intended risk level.
Example: You target 70% shares / 30% bonds. After a strong year for shares, your allocation has drifted to 80% shares / 20% bonds. Rebalancing means selling some shares and buying bonds to return to 70/30.
Related Articles
- Growth vs Defensive Assets Explained
- Investment Portfolio Building in Australia
- Portfolio Rebalancing Explained
- Retirement Portfolio Asset Allocation
- Getting Started hub
- Investing hub
Frequently Asked Questions
Should I hold bonds in my 30s in Australia? Most financial planning frameworks suggest that investors in their 30s with long investment horizons (20+ years) can hold predominantly shares. Small bond allocations provide modest volatility reduction but reduce long-term return potential. Many investors in their 30s choose all-equity ETFs like DHHF. The right answer depends on your specific situation and risk tolerance.
How does superannuation fit into my asset allocation? Your super balance is part of your total investment portfolio — not separate from it. When thinking about asset allocation, consider your super plus any non-super investments combined. If your super is in a high-growth option (85%+ shares), your non-super portfolio may lean more defensive to balance the overall picture, or vice versa.
What is the 60/40 portfolio? The 60/40 portfolio (60% shares, 40% bonds) is a classic balanced allocation that has historically provided a balance of growth and defensive protection. It is a common reference point in retirement planning. Whether it is appropriate depends on your specific time horizon and risk tolerance.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.